Inflation rate to increase in 2010

Inflation rate to increase in 2010

Nov 20, 2009 - PropertyGuru.com.sg

The inflation rate is expected to increase next year as the Housing Development Board (HDB) increased its property values.

Singapore revised its consumer price index (CPI) inflation forecast from 1 to 2 percent to 2.5 and 3.5 percent.

This is in connection with the recent revision of the Inland Revenue Authority (IRA)’s annual values for HDB properties, which factor into the Consumer Price Index (CPI) as imputed rents under the component of the accommodation cost.

Singapore’s Monetary Authority considered the revision as technical. The inflation forecast, excluding the cost of accommodation and private vehicles, remained at 1 to 2 percent.

“This core inflation should remain non-threatening in the absence of domestic price pressures, even as one-off factors push up headline inflation,” says Alvin Liew, an economist from Standard Chartered.

But some economists predict other risks may affect next year’s inflation rate.

Leong Wai Ho of Barclays Capital believes “the forecast adjustment may not have fully factored in the prospect of higher food prices,” due to the unfavourable economic conditions across Asia.

And although the government’s revision is technical, “the potential impact on inflation expectations cannot be completely ignored,” says economist Kit Wei Zheng of Citi.