Economy

Economy: Singapore’s headline CPI continued to fall in Jan ’16, coming in at -0.6 y/y (Dec: -0.6%), its 15th straight month of decline. This is the longest spell of negative inflation in almost four decades.

However, core inflation stayed in positive territory at 0.4% (Dec: 0.3%) and is expected to rise gradually in 2H16 as the effects of one-off Budget measures and oil fades. This means that the MAS is unlikely to ease monetary policy at its semi-annual Apr meeting unless oil sinks further or the Singapore economy takes a turn for the worse.

MAS revised down its inflation forecast for 2016 to between -1% and 0% (from -0.5% to 0.5% previously) amid slumping oil prices and COE premiums, but left the core inflation forecast unchanged at 0.5%-1.5%. Meanwhile, Maybank-KE’s headline inflation forecast for 2016 stays at 0.5%

The core reading (CPI ex-accommodation and private road transport) edged up, in part due to the smaller reduction in electricity tariffs and higher food and retail goods inflation more than offsetting the fall in services inflation.

Meanwhile, housing and utilities remained the largest contributor of deflation during the month, caused by a softening housing rental market.

The decline in private road transport costs gathered pace to -1.8% (Dec: -1.1%) as cheaper COEs offset the increased pump prices.