Singapore May inflation slows to 5%

SINGAPORE: Singapore's inflation slowed to 5% in May from a year earlier and authorities cited moderating price pressures from wages and other business costs, indicating the central bank might have room to ease monetary policy slightly in October.

The May inflation was slightly below the median estimate of 5.1% of 11 economists polled by Reuters and a sharp improvement over April's 5.4%, the highest rate in 2012.

Central banks in the Philippines, New Zealand, Thailand, Indonesia, India and South Korea held rates this month, while China and Australia chose to cut benchmark interest rates as growth concern increased and inflationary pressures eased.

Singapore's inflation has, however, remained high compared with other Asian countries due to a shortage of homes and measures to cap the number of motor vehicles on the roads, which sent car prices spiralling higher.

The government has also made it harder for employers to bring in cheaper foreign workers, putting upward pressure on salaries for low-skilled workers such as waiters and construction workers.

“Wages and other business costs will continue to pass through to consumer prices, albeit at a more moderate pace than that seen early this year,” the Monetary Authority of Singapore (MAS) and Trade and Industry Ministry (MTI) said in a statement.

“There could also be downward pressure on the prices of domestic commodity-related items given the recent weakness in global commodity markets,” they added.

MAS and MTI reiterated their forecast that inflation would ease in the second half to come in between 3.5% and 4.5% this year. Core inflation, which excludes accommodation and private road transport, would likely be in the range of 2.5% to 3%, they added.

“Inflation pressures appear to be easing The May CPI data also surprised by showing negative month-on-month changes on some of the more labour-intensive components such as recreation and healthcare,” said Bank of America Merrill Lynch economist Chua Hak Bin. - Reuters

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