Chart of the Day: Inflation forecasts for 2018 hit 0.5%-1.5%

Growth is resilient in Q1 and the labour market is improving, OCBC says.

This chart from OCBC Bank shows that in its 2018 forecast, Singapore's headline and core inflation will hit 0.5% and 1.5% YoY respectively. "Given the resilient growth in 1Q2018 and the improving labour market conditions, headline and core inflation are likely to simmer in the coming months/quarters," analyst Selena Ling said.

Despite the trade tensions between US-China running in the background, Ling said its effect on the growth of global GDP and trade has been limited.

Notwithstanding the March moderation in inflation readings, Monetary Authority of Singapore's (MAS) recent decision to slightly steepen the S$NEER slope without a change to the bandwidth or the level at which it is centred, suggests that the inflation trajectory is still likely upward. However, Ling pointed out that the MAS set a forecast range of 0-1% (headline inflation) and 1-2% (core inflation).

Analysts are divided as to whether the tightening will continue in October or not, due to inflation surprises and the movement of the Singapore dollar against other currencies.

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