OUTLOOK
MAS and MTI said that core inflation is “expected to stay on a gradual moderating trend over the rest of the year as import cost pressures continue to decline and tightness in the domestic labour market eases”.
“Although crude oil prices have risen in recent weeks, global prices for most food commodities, as well as intermediate and final manufactured goods, have continued to decline,” the authorities said.
“In addition, inflation for services associated with overseas travel should moderate further over the course of the year as supply conditions in hospitality sectors around the world improve.”
MAS and MTI said the gradually strengthening Singapore dollar trade-weighted exchange rate should continue to temper Singapore’s imported inflation in the coming months.
On the domestic front, increases in unit labour costs have slowed in tandem with the cooling labour market.
“Nonetheless, businesses are likely to continue passing through the earlier increases in labour and other business costs to consumer prices, albeit at a reduced pace,” said MAS and MTI.
Meanwhile, private transport inflation is also expected to be lower compared with last year, amid the larger projected COE supply this year.
Accommodation inflation should also continue to ease as the supply of housing units available for rent increases over the course of the year.
MAS and MTI projected both headline inflation and core inflation to average 2.5 per cent to 3.5 per cent for 2024. Excluding the transitory effects of the 1 per cent-point increase in the GST rate to 9 per cent, headline and core inflation are expected to come in at 1.5 per cent to 2.5 per cent.
However, risks to inflation remain, as fresh geopolitical shocks and adverse weather events around the world could put upward pressure on global energy and food prices, as well as shipping costs.
Domestically, stronger-than-expected labour market could also lead to re-acceleration in wage growth.
“Conversely, an unexpected weakening in the global economy could induce a greater easing of cost and price pressures,” said MAS and MTI.