Singapore’s headline inflation rate has dropped to its lowest point in over three years, reflecting a significant easing of price pressures. According to data released on Monday, the inflation rate fell to 1.4% in October, down from September’s 2%. This marks the first time since March 2021, when inflation was at 1.3%, that the rate has dipped below 2%.
Key Drivers of the Decline
One of the primary reasons for the decline was a reduction in the cost of cars and a slowdown in the rate of rental property price increases. The easing of price pressures was more significant than economists had anticipated, with the consumer price index (CPI) rise falling short of the 1.8% expected by Reuters’ poll of economists.
Singapore’s core inflation rate, which excludes accommodation and private transportation costs, was also down. It came in at 2.1% in October, compared to 2.8% in September. This figure was also lower than the 2.5% forecast by economists.
The Monetary Authority of Singapore (MAS) attributed the decline in core inflation to slower price increases in services, as well as reduced inflationary pressures on electricity, gas, medicine, and clothing.
Singapore Dollar Strengthens
Following the release of the inflation data, the Singapore dollar strengthened slightly, trading at 1.34 against the U.S. dollar, a 0.13% increase.
Monetary Policy and Economic Growth
Singapore’s approach to managing inflation differs from many other countries. Instead of relying on benchmark interest rates, the MAS manages the exchange rate of the Singapore dollar. This strategy helps stabilize the price of goods and services while promoting healthy economic growth. The MAS adjusts the slope, width, and level of its undisclosed policy band to manage fluctuations in the Singapore dollar against the currencies of its trading partners.
Economic Growth Surges
In addition to the positive inflation data, Singapore has reported robust economic growth. On Friday, the government announced a 5.4% year-on-year expansion in GDP for the third quarter, surpassing the 4.1% advance estimate released last month. This marks the highest quarterly growth since the fourth quarter of 2021, when the economy grew by 6.1%.
As a result, Singapore has revised its full-year economic growth forecast upward to “around 3.5%”, compared to the earlier projection of 2.0% to 3.0%.
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