Singapore's inflation may have eased slightly, but central bank warns pain likely to linger

Singapore's system is apt to look persistent symptom from planetary fiscal concerns, adjacent though the country's halfway ostentation eased somewhat successful October.

The Monetary Authority of Singapore warned of prolonged hazard factors piling onto the nation's fiscal vulnerability successful the corporate, lodging and banking sectors — citing weakening request and persistent inflationary pressures.

"Amid weakening outer demand, the Singapore system is projected to dilatory to a below-trend gait successful 2023," the cardinal slope said successful its latest Financial Stability Review report. "Inflation is expected to stay elevated, underpinned by a beardown labour marketplace and continued pass-through from precocious imported inflation."

Warning of contagion hazard from planetary markets, the cardinal slope said the nation's corporate, household, and fiscal sectors should "stay vigilant" amid the macroeconomic challenges that prevarication ahead.

"The astir contiguous hazard is simply a imaginable dysfunction successful halfway planetary backing markets and cascading liquidity strains connected non-bank fiscal institutions that could rapidly spill implicit to banks and corporates," it said.

The study comes days aft the federation reported immoderate easing successful ostentation prints for October. While inactive astatine 14-year highs, Singapore's halfway user terms scale roseate 5.1% for the period compared with a twelvemonth ago, somewhat little than 5.3% successful September.

Singapore does not person an explicit ostentation target, but MAS sees a halfway ostentation complaint of 2% arsenic mostly reflective of "overall terms stability." The country's October halfway CPI is besides importantly supra that level arsenic good arsenic the cardinal bank's forecast for "around 4%" ostentation for 2022.

JPMorgan analysts said portion they expect halfway ostentation levels to stay elevated until the archetypal 4th of adjacent year, they foretell the readings that travel volition amusement much easing. That would permission country for the cardinal slope to measurement distant from a hawkish stance.

"If this forecast materializes, this would suggest small request for the MAS to tighten its NEER argumentation adjacent year," the steadfast said successful a note.

Minutes from the latest Federal Reserve gathering released this week said that smaller involvement complaint hikes should hap "soon" — an denotation that its planetary peers, including the MAS, could besides instrumentality a breather from their ain tightening cycles.

"MAS is successful a akin presumption excessively — it has tightened monetary argumentation a batch successful 2022 and volition privation to spot however the interaction plays out," said BofA Securities ASEAN economist Mohamed Faiz Nagutha.

"This means further tightening is not a given, but besides cannot beryllium ruled retired astatine this juncture," helium said.

Nagutha emphasized, however, that elevated ostentation volition proceed to broaden for a while.

"MAS volition not beryllium declaring it a occurrence anytime soon successful our view," helium said.

IG marketplace strategist Jun Rong Yeap said that besides applies to MAS' peers successful Asia-Pacific.

Though planetary cardinal banks similar the Reserve Bank of Australia and the Bank of Korea person taken smaller steps successful involvement complaint hikes, ostentation volition stay a cardinal focus, helium said.

"Persistence successful pricing pressures could inactive a thrust a recalibration of however precocious oregon however overmuch longer involvement rates volition person to beryllium successful restrictive territory," helium said. "And that volition travel with a greater trade-off for growth."