In Focus
ECONOMY | Staff Reporter, Singapore

Household inflation expectations creep up to 2.97%

No thanks to the looming cut in COE quotas this 2018.

Singapore households expected inflation rate of up to 2.97%, according to a survey conducted by the Singapore Management University (SMU) in December.

In the Singapore Index of Inflation Expectations (SinDEx) survey, the result has been found higher than the 2016 Q4 average of 2.84%. However, it is relatively lower compared to the average historical inflation expectations of 3.44% since September 2011.

On the domestic front, SMU cited a few factors might have contributed to counterbalancing pressures on the medium- and long-term inflation expectations.

Here’s more from the survey:

First, an expected reduction in the quota of Certificates of Entitlement available for 2018 might have increased private road transportation costs.

Second, abstracting from the larger quantum of disbursement of Service and Conservancy Charges rebates in October 2017 compared to October 2016, the decline in housing rentals and imputed rentals on owner-occupied accommodation has stabilised in recent months. As accommodation and private road transportation form a major part of the consumption basket for Consumer Price Index (CPI), it’s hardly surprising that these two would have an uplifting effect on inflation expectations particularly for the headline rate.

On the flipside, as a third factor, a slower increase in energy prices might have contributed to dampening the effect of the increase in overall price levels.

Fourth, overall imported inflation has been benign with a perception of a relatively strong Singapore dollar relative to major global currencies, particularly the US dollar.

Finally, with a still-loose labour market, pass-through costs such as wages have not substantially increased price pressures. In sum, weighing in those opposite price pressures, popular perception seems to be an upward tick in medium and long-term inflation expectations, particularly the headline rate.

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