MAS cuts inflation forecast, maintains appreciation path for Singapore dollar

The Monetary Authority of Singapore (MAS) has lowered its inflation forecast for the year on weaker expected growth in car and housing prices.

It now expects overall consumer prices to rise to between 3 and 4 per cent, down from the previously expected 3.5 to 4.5 per cent.

Core inflation, excluding accommodation and private transport costs, is similarly tipped to be a lower 1.5 to 2.5 per cent, compared with the earlier forecast of 2 to 3 per cent.

Given the revised inflation forecast, and an expected "modest" rate of economic growth this year, the MAS has decided to keep its current stance of a "modest and gradual appreciation" in the Singapore dollar, it said.

The current stance is appropriate for "containing inflationary pressures, anchoring inflationary expectations and facilitating the restructuring of the economy towards sustainable growth", it added.

The lower inflation expectations reflect weaker-than-expected price increases over the last few months, the MAS said on Friday.

Premiums for Certificate of Entitlements have also fallen due to curbs on car loans, and housing inflation should rise at a slower pace this year, it added.

However, the central bank also noted that the tight labour market will put pressure on core inflation to rise in the second half of this year, as higher salary costs for companies translate into higher prices for consumers.

The Singdollar slipped by 0.2 per cent against the US dollar after the news, according to Bloomberg data.