MAS seen loosening policy in October as disinflation stalls: UOB

Core inflation will start easing drastically in Q1 2025.

Analysts expect the normalization of Singapore's monetary policy via a slight slope reduction to only happen in October due to delayed disinflation.

UOB associate economist Jester Koh said in a note that the progress of disinflation is somewhat “latent” although price pressures remained benign for certain sectors, including tourism and healthcare.

Koh believes it will be more prudent for the Monetary Authority of Singapore (MAS) to maintain the prevailing restrictive slope settings for a little longer following the recent uptick in imported and external inflation.

“We defer our base case for the start of policy normalization (via a slight slope reduction) to the Oct 2024 MPS although in our view, the possibility of a July move cannot be entirely ruled out,” Koh said.

Disinflation appears to have stalled after core inflation rose at the same rate of 3.1% YoY for the third consecutive month in May.

Inflation remained particularly sticky in recreation & culture, healthcare and education.

A significant slowdown in core inflation will only likely start in the first quarter of 2025 due to base effects, according to UOB.

It projected core inflation to average 3% this year before easing drastically to 1.6% in 2025.

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