Inflation to remain sticky in the second half: RHB

The MAS is expected to keep its current monetary policy parameters unchanged.

Headline inflation is projected to climb 3.8% YoY in the second half of 2024 as prices of food, power and imported goods will likely remain elevated for the rest of the year, according to RHB.

RHB analysts Barnabas Gan and Laalitha Raveenthar expect headline inflation to quicken to a 3.8% YoY increase in the second half following a 2.9% rise during the January-May period. After increasing at the same pace of 3.1% for three consecutive months, core inflation is now up 3.2% YoY in the five months through May.

They said Singapore should brace for higher imported inflation in the coming months as prices of food, energy and metals have already risen fast in the second quarter. Imported inflation will also continue to rise for the import-dependent nation as a result of the ongoing geopolitical tensions abroad as well as the lingering impacts of El Niño.

“We think that global factors such as supply chain disruptions, geopolitical tensions, and adverse weather conditions could significantly drive up Singapore’s import costs causing inflationary pressures,” they added.

RHB analysts pointed out that any increase in global energy prices would raise domestic power costs and translate to higher production costs and consumer prices. Higher shipping costs will also make food items more expensive for consumers as the country imports over 90% of its food.

“This "sticky" inflation will eventually reduce household purchasing power and potentially spur a wage-price spiral,” they said. 

To combat high inflation, RHB expects the Monetary Authority of Singapore (MAS) to maintain its current monetary policy parameters throughout the year.