Singapore has been forced to review its official inflation forecasts, authorities admitted on Monday, after data showed its key price gauge climbed in December by the fastest pace in nearly eight years, driven by a steep increase in airfares.
The core inflation rate – the central bank’s favoured price measure – rose to 2.1% in December on a year-on-year basis, the highest since July 2014 and topping economist forecasts. A poll of economists had forecast a 1.7% increase.
Singapore’s central bank tightened its monetary policy in October, delivering its first such move in three years, amid mounting cost pressures. Its next policy review is scheduled for April when it is widely expected to tighten further.
Monday’s data showed headline inflation rose by 4%, a near nine-year high, beating economists’ forecast of 3.75%.
Steep increases in airfares and Covid-19 testing costs under Singapore’s quarantine-free travel schemes were a major factor in December’s price jump.
There remains significant uncertainty surrounding the outlook for inflation in the near term, including from the costs of air travel and commodity prices such as food and oil, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said in a statement.
“Given the recent stronger-than-projected inflation outturns, including the sharp uptick in airfares, MAS and MTI are reviewing the current forecast ranges for CPI-All Items inflation and MAS Core Inflation in 2022,” they said.
The government had a previous forecast for 2022 headline prices to average 1.5–2.5% and core inflation to increase to 1-2%. For 2021, core inflation came in at 0.9% and headline prices rose to 2.3%.
Inflation is surging around the world as economies recover from the pandemic, creating demand at a time when bottlenecks in transportation are causing shortages in various commodities and goods.
- Reuters with additional editing by Sean O’Meara