Core Inflation Singapore: 3 Key Trends to Watch

Core inflation in Singapore has been on the rise in recent months, reaching 2.5% year-on-year in February 2023. This is the highest level since December 2013, and it is above the Monetary Authority of Singapore's (MAS) target range of 1-3%.

There are a number of factors contributing to the rise in core inflation, including:

• Rising global commodity prices: The prices of oil and other commodities have been rising in recent months, which is feeding into higher core inflation.
• Increased demand: The Singapore economy is growing, which is leading to increased demand for goods and services. This is also contributing to higher core inflation.
• Wage growth: Wages in Singapore have been growing in recent months, which is also putting upward pressure on core inflation.

The MAS has indicated that it is concerned about the rise in core inflation. The central bank has said that it will take steps to cool inflation if it continues to rise.

There are a number of things that the MAS can do to cool inflation, including:

• Raising interest rates: Raising interest rates makes it more expensive to borrow money, which can slow down economic growth and reduce demand for goods and services.
• Tightening monetary policy: The MAS can also tighten monetary policy by reducing the supply of money in the economy. This can also help to slow down economic growth and reduce demand for goods and services.
• Implementing fiscal measures: The government can also implement fiscal measures to cool inflation, such as increasing taxes or reducing spending. This can also help to slow down economic growth and reduce demand for goods and services.

It is important to note that the MAS is unlikely to take any drastic action to cool inflation. The central bank is likely to take a gradual approach to ensure that the economy does not slow down too much.

What does this mean for businesses?

The rise in core inflation is a concern for businesses. Higher inflation can lead to increased costs for businesses, which can eat into profits. Businesses may also need to raise prices to offset the impact of higher costs, which can lead to a loss of market share.

There are a number of things that businesses can do to mitigate the impact of higher core inflation, including:

• Improving efficiency: Businesses can improve their efficiency to reduce costs. This can be done by investing in new technology or by streamlining processes.
• Raising productivity: Businesses can also raise productivity by investing in employee training or by implementing new technologies.
• Hedging against inflation: Businesses can also hedge against inflation by using financial instruments such as futures contracts or inflation-linked bonds.

What does this mean for consumers?

The rise in core inflation is also a concern for consumers. Higher inflation means that consumers will have to pay more for goods and services. This can put a strain on household budgets and reduce consumer spending.

There are a number of things that consumers can do to mitigate the impact of higher core inflation, including:

• Saving more money: Consumers should save more money to offset the impact of higher inflation. This can be done by reducing expenses or by increasing income.
• Investing in inflation-linked assets: Consumers can also invest in inflation-linked assets, such as inflation-linked bonds or real estate. These assets will provide a hedge against inflation and help to preserve the value of their savings.
• Shopping around: Consumers should also shop around for the best deals on goods and services. This can help to reduce the impact of higher inflation on their household budgets.

Conclusion

The rise in core inflation in Singapore is a concern for businesses and consumers. However, there are a number of things that businesses and consumers can do to mitigate the impact of higher inflation. By taking these steps, businesses and consumers can help to protect themselves from the negative effects of inflation.

Tables

Table 1: Core Inflation in Singapore

Table 2: Factors Contributing to Core Inflation in Singapore

Table 3: Measures to Cool Inflation

Table 4: Tips to Mitigate the Impact of Core Inflation