Singaporeans' inflation expectations inch up as oil prices bounce back

Slower interest rate hikes are also a key reason.

Singaporean households expect median inflation to hover at 2.79% over the coming year, according to the latest quarterly survey for Singapore Index of Inflation Expectations (SInDEx) by Singapore Management University (SMU).

This is higher than the 2.74% recorded in December 2015.

Significantly, for a subgroup of the population who own their accommodation and use public transport, the One-year-Ahead median Singapore core inflation rate for the subgroup rose significantly to 2.91% in the March 2016 survey compared to 2.67% in December 2015, which was its lowest level since June 2013.

The uptick was on back of rising global oil prices and more tempered expectations of an interest rate hike by the US Federal Reserve.

“The rise in global oil prices from 12-year lows and a concurrent increase in consumer confidence helped improve the market sentiment in the last quarter," said Assistant Professor of Finance Aurobindo Ghosh, who is the Principal Investigator of the
SInDEx Project.

"The anticipated strengthening of the US dollar was also slower than expected. The combined impact might have dampened Singaporeans’ expectations of inflation through more benign imported inflation," he added.