MAS foresees inflation to average 0.5-1.5% this year

External inflationary pressures have picked up.

After Singapore posted a headline inflation of 0.7% in March, the Monetary Authority of Singapore is expecting the whole year inflation to average 0.5-1.5%.

MAS noted that external inflationary pressures have picked up amidst a turnaround in global commodity markets. Further, it added that global oil prices have risen from their trough in the previous year, and are likely to average higher in 2017.

However, it also said that such price pressures would be capped by elevated inventories as well as rising US crude oil production whilst domestic sources of inflation remain relatively muted.

UOB said in flash note that during the monetary meeting this month, the central bank maintained its neutral SGD NEER policy stance and keeping the bandwidth and midpoint unchanged whilst reiterating that the existing policy stance is appropriate for an extended period and should ensure medium-term price stability.

"This shows that the central bank is not expecting runaway prices and that although current economic conditions are better than just a year ago, the weakness in the labour market will set a limit on cost-pushed inflation," UOB said.

As such, UOB believes that the current dovish policy stance will remain even in the upcoming monetary policy meeting in October.