SINGAPORE: Singapore experienced a lower-than-expected inflation rate in March, providing a brief respite for consumers. However, economists caution that the trend may not persist into the second quarter due to rising global commodity prices.

In a recent report, RHB Bank highlighted concerns about “higher food, energy, and metal prices this quarter,” suggesting that these factors could lead to increased imported inflation in Singapore. This observation aligns with the upward trend in commodity prices seen across international markets, which might soon impact domestic prices.

RHB was quick to point out that the decline in March inflation was not a result of lower demand conditions. Instead, it indicated that several categories, including household durables and services, housing and utilities, and miscellaneous goods and services, showed either higher or near-forecasted inflation levels.

“The data reinforces our view that Singapore’s growth momentum will continue to accelerate as indicated by our proprietary GDP leading indicator. This view is supported by our global growth assumptions, which forecast above-consensus GDP figures for the US and China in 2024,” RHB noted in its report.

RHB’s analysis also suggested that the milder inflationary pressures seen so far might be due to a relatively stronger Singapore Dollar Nominal Effective Exchange Rate (S$NEER), helping to curb the impact of imported inflation.

Regarding monetary policy, RHB recommends maintaining the current parameters unchanged throughout the year.

In contrast, UOB has a different perspective, suggesting potential adjustments in the near future. According to UOB, the continued transmission of imported disinflation into Singapore’s core Consumer Price Index (CPI) could lead to a shift in monetary policy.

UOB predicts that adjustments could occur as early as July, with a possible 50 basis point reduction in the policy slope. This approach might help manage imported disinflation, ultimately leading to a more balanced inflation rate and stabilizing the Singaporean economy in the long term.

As the second quarter unfolds, all eyes will be on global commodity prices and their impact on Singapore’s inflation rates. The government and monetary authorities will need to monitor these trends closely to ensure that the country’s economic stability and growth momentum remain on track.