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People walk during their lunch break in the financial business district of Raffles Place
People are seen at Raffles Place in Singapore on Jan 11, 2021. (Photo: AFP/Roslan Rahman)

(Updated: )

SINGAPORE: Singapore’s key price gauge rose by the fastest pace in more than a year in March, in part due to higher services inflation as well as smaller declines in retail and other goods, official data showed on Friday (Apr 23).

The core inflation rate – the central bank’s favoured price measure – rose to 0.5 per cent in March from a year earlier, compared with 0.2 per cent in the prior month. A Reuters poll of economists had forecast an increase of 0.4 per cent.

Economists are keeping an eye on inflation data for any signs that may prompt the Monetary Authority of Singapore (MAS) to tighten its policy as the economy recovers, but they said Friday’s data was still well within the central bank’s expectations.

Last week, the MAS kept monetary policy settings unchanged and said the accommodative stance was appropriate due to a benign inflation outlook and global economic uncertainties caused by the pandemic.

“It looks pretty difficult for them to normalise policy this year,” said Barclays regional economist Brian Tan.

READ: Singapore economy grows 0.2% in Q1, first expansion since COVID-19 outbreak

READ: ‘Green shoots’ of recovery for Singapore’s economy, although uncertainties remain, say economists

For 2021, Singapore’s central bank expects core inflation to average 0 to 1 per cent, while headline inflation is forecast to come in between 0.5 per cent and 1.5 per cent.

While inflation may pick up due to low base effects from last year, it was unlikely to accelerate in the second half of 2021 as business cost pressures are contained, the MAS and Ministry of Trade Industry (MTI) said.

Singapore’s headline consumer price index (CPI) spiked to 1.3 per cent in March year-on-year – the fastest in nearly four years – from 0.7 per cent in February.

READ: Analysts expect private home prices to rise further on tight supply and strong demand

Separately, Singapore’s private home prices rose 3.3 per cent in January-March from the prior quarter, the fastest pace in more than two years, data from the Urban Redevelopment Authority showed, adding to expectations for more cooling measures.

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