Asked for their outlook, economists said that the factors that have heated up inflation in recent months are unlikely to go away soon. These include a surge in global energy and food prices, a tight labour market and an improvement in domestic demand.
Injunction data will have to deal with an additional factor like the Malaysian chicken export ban, which kicked in at the beginning of the month and resulted in some businesses in Singapore raising prices, said CIMB Private Bank economist Song Seng Wun.
He said that favorable base effects could mean that year-on-year inflation numbers may start to come off their highs, despite the confluence of inflation pressures.
Barclays regional economist Brian Tan expects Singapore s consumer price indices to pick up further before stabilising in the months of July and August due to base effects from a year ago.
He told CNA that inflation was still quite tame in the first half of 2021 so we saw the numbers climb up so quickly in the first half of the year, as inflationary pressures went up at the beginning of the year.
In the second half of last year, when measures were eased to reopen the economy, inflation picked up so that will create a little bit of a balancing effect against the high inflation we are getting now. As commodity prices drop from their recent peaks, Maybank economists Chua Hak Bin and Lee Ju Ye reckon that core inflation will peak in the third quarter.
Recent moves by some countries to relax their export bans on products such as palm oil and fertilisers will help alleviate food price pressures. They wrote in a note that the slowdown in global growth and monetary tightening also combine to slow demand and cool commodity prices.
The economists raised their full-year inflation forecasts in order to account for stronger than expected price pressures, particularly from energy and food, as well as elevated Certificate of Entitlement COE premiums and rental costs.
The tight labour market in Singapore is susceptible to sparking a wage-price spiral which happens when workers demand higher pay to keep up with inflation and causes companies to raise prices to cover their costs.
Maybank now expects core inflation to be 3.2 per cent for 2022, up from an earlier 3 per cent estimate, and headline inflation to be 5.1 per cent, compared to 4.8 per cent previously.
UOB senior economist Alvin Liew is pencilling in full-year headline inflation at 5 per cent and core inflation at 4 per cent, and he raised his projections by 0.5 percentage points each.
He wrote that the risks are tilted to the upside, and that is in line with the official outlook for headline CPI, but exceeds the official core inflation forecast range.