Maybank Securities Singapore raises 2022 inflation forecast slightly

SINGAPORE – Maybank Securities Singapore raised its 2022 inflation forecast slightly for the republic’s core inflation to 4.2 per cent from 4.0 per cent and headline inflation to 6.2 per cent from 6.0 to account for the larger than expected pick-up in food and services costs.

Its analysts Chua Hak Bin and Lee Ju Ye said the wage-price spiral will intensify in the coming months with the implementation of the local qualifying wages of S$1,400 (S$1=RM3.21) this month; and the expansion of the Progressive Wage Model to the retail sector in September this year as well as the food & beverage (F&B) sector in March 2023.

“Travellers flying out of Changi Airport will also have to pay higher airport charges, with total departure fee rising by S$6.9 to $59.2 from Nov 1, 2022, and by another S$3 in April 2023 and a further S$3 in Apr 2024,” said the analysts in their research paper.

They expect the central bank Monetary Authority of Singapore (MAS) to tighten monetary policy in October yet again, by re-centring the Singapore dollar nominal effective exchange rate (S$NEER) to the prevailing level.

“The S$NEER is currently trading at around +1.5 per cent above the implied mid-point, based on our estimates. We are not expecting a ‘double move’ (both re-centring & steeper slope) because of the rising likelihood of a technical recession,” they said.

They also expect MAS to raise its headline inflation forecast to 5.5 per cent-6.5 per cent from 5.0 per cent-6.0 per cent and core inflation forecast to 3.5 per cent-4.5 per cent from 3.0 per cent-4.0 per cent.

The research house also expects the Federal Reserve (Fed) to hike rates by another 125 basis points (bps) in the remaining two meetings of November and December this year and by another 25bps in 2023.

“The Fed’s more hawkish projections could drive Singapore’s mortgage rates to 4.5 per cent by the end of this year and 5.0 per cent by the middle of next year, which will be near 20-year highs,” said the analysts.

It was jointly announced by MAS and the Ministry of Trade and Industry on Friday (Sept 23) that Singapore’s core inflation soared to 5.1 per cent in August versus 4.8 per cent in July, with prices rising by 0.5 per cent on a month-on-month basis versus 0.6 per cent in July.

Headline inflation, meanwhile, rose to 7.5 per cent from 7.0 per cent in July, with prices rising by 0.9 per cent from the previous month of 0.2 per cent. – Bernama / pic TMR File