Getting Used to Inflation in Singapore
Just one month ago, the news reported that inflation slowed down and core inflation dropped from 2.4% to 2.2% from July to August. Just this week, figures showed that core inflation is up and back to 2.4% in September from 2.2% in August. Overall inflation rates which reflects housing and private transport is much higher – 4% in July, 3.9% in August, 4.7% in September compared to the previous year’s figures. August, by the way, was a 2-year low in inflation rates.
The explanation has been the same for the past few years – rising COE premiums and runaway property prices, and the economy is flooded with cash because of low interest rates.
MAS is relaxing the appreciation of the SGD to slow down inflation rates and bring down the price of imported goods e.g. fuel, food. However, this makes exports expensive – so manufacturing is hit hardest. For example, it has been contracting since July. Is there a silver lining to this news of rising prices, stagnant economy, uncertain job security in certain industries and contracting savings? The positive spin is that inflation so far has not peaked the highest recent inflation rate of 6.5% in 2008. Also, recession is again held at bay for now.
It could be worse, but small consolation.