Singapore - The latest quarterly survey from DBS Bank and Singapore Management University (SMU) showed that people's expectations of how much prices will rise in the year ahead hit a nine-year high in March this year.

The findings are in line with another survey by the Monetary Authority of Singapore (MAS), which indicates inflation remains a challenge this year.

According to the Singapore Index of Inflation Expectations (SInDEx) survey, headline inflation expectations, which include private road transport and accommodation, one year ahead rose to 4.1 per cent in March, up 0.9 percentage point from December.

A more representative measure of inflation expectations in the survey focused on a sub-group of the population who own their accommodation and use public transport.

The respondents in this sub-group face inflationary pressures as defined by MAS core inflation on a day-to-day basis.

MAS core inflation is a measure of underlying price pressures in the economy and excludes private road transport and accommodation costs, which are subject to short-term fluctuations.

Core inflation expectations for the year ahead rose to 3.9 per cent, up a percentage point from December's measure.

Taken together, the composite index of inflation expectations for the year ahead (SInDEx1) reached 4 per cent in March from 3.2 per cent in December. The composite index is at the highest since September 2012.

SInDEx1 puts less weight on more volatile components such as accommodation, private road transport, food, and energy related expenses.

SMU Assistant Professor of Finance and founding principal investigator of the survey Aurobindo Ghosh said global inflation has been caught in a perfect storm.

The Covid-19 pandemic and the Russia-Ukraine crisis have dealt a double whammy to global commodity prices and supply chains.

"Singapore being a small open economy is vulnerable to all these risk factors," added Prof Ghosh.

DBS chief economist and managing director of group research Taimur Baig said inflation is now a global phenomenon, but the rates of increases in Singapore are more modest compared with the United States and Europe.

DBS is a co-sponsor and research partner of this survey.

In the US, headline inflation hit a 40-year high of 8.5 per cent year on year in March.

Dr Baig said credible policy action by the MAS will keep expectations moderate in Singapore.

Prof Ghosh added: "The impact of pass-through costs like rental, distribution and labour costs in a tight labour market are harder to mitigate even with the appreciating Singapore dollar against a trade weighted basket of currencies."

Dr Baig said: "Under these circumstances of sustained price pressure, further steepening of the nominal exchange rate band by Singapore's central bank looks justified."

Last week, the MAS tightened monetary policy for the third time in the past six months.

The tighter monetary policy stance builds on the policy moves in October 2021 and January 2022.

In the US, the Federal Reserve had already raised interest rates by 25 basis points in March, and more monetary tightening is expected.

The DBS-SMU SInDEx survey polled around 500 randomly selected individuals representing a cross section of Singaporean households.

The sampling was done using a quota sample over gender, age and residency status.

Another survey of economic indicators by the central bank, the MAS Survey of Professional Forecasters showed the median headline inflation - Consumer Price Index (CPI)-All Items inflation - for 2022 at 3.6 per cent, up from 2.1 per cent in the December survey.

The median forecast for MAS core inflation in 2022 is at 2.7 per cent, up from 1.8 per cent previously.

The MAS Survey showed both CPI-All Items inflation and MAS core inflation are expected to ease in 2023, with both CPI-All Items inflation and MAS core inflation coming in at 2.4 per cent.