MAS likely to tighten monetary policy in April following inflation uptick

Headline inflation moved at a faster pace in February at 4.3% YoY.

Experts believe that the Monetary Authority of Singapore (MAS) will further tighten its monetary policy in April following the inflation uptick seen in February.

Data from the MAS showed that headline inflation moved at its fastest rate since February 2013 at 4.3% year-on-year (YoY) (+0.9% month-on-month), also beating market expectations of 4.2% YoY.

Despite easing last month to 2.2% YoY, UOB analysts believe that core inflation could also be higher or remain at the 2% handle.

ING echoed this, saying MAS’s 3% core inflation may happen in May.

“With the impact of these recent developments likely to surface in March, we may need to brace ourselves for faster inflation in the near term. With expectations for faster inflation down the line, we fully expect MAS to resort to additional tightening at the upcoming April meeting,” ING said.

UOB, for its part, said they expected MAS to raise the slope of the S$NEER policy band to a 1.5% gradient whilst "keeping the width and centre unchanged."

Looking ahead, ADDX said consumer prices in Singapore will continue to experience “strong upward momentum in view of surging inflation globally and the tight labour market” in the country.

This sentiment was shared by UOB, adding that tightening of the labour market will potentially lead to “higher wage pressures over the year.”

UOB said that gradual reopening of borders could also become a strong driver for insulation pressure for the year ahead since it will push up transport costs, such as airline tickets and accommodation.