Why Singapore inflation will come down from its February high

Chinese New Year distortions are wearing off.

Commenting on the latest February inflation data which surged to 4.9% y/y (consensus: 4.1%) from 3.6% y/y the previous month, BBVA said that the jump was primarily due to rising transportation costs from a tax increase on cars, as well as seasonal effects from the Chinese Lunar New Year.

But it noted that “given the transitory nature of the Lunar New Year, going forward we expect inflation to moderate from February’s level.”

BBVA also said that even though inflationary pressures remain uncomfortably high, including from rising housing costs, the Monetary Authority of Singapore should keep its current appreciation path unchanged at its semi-annual policy meeting in mid-April.