Singapore headline CPI rate drops to near 30-year low even as core inflation edges higher

The March year-on-year CPI rate of -1% marked the 17th straight month of declining prices in the City.

The Singapore consumer price inflation rate has fallen to a near three decade-low in March as private transport costs in the City continued to decline but higher food prices helped core inflation to edge higher.

The March year-on-year rate of -1% is its lowest since late 1986, and marked the 17th straight month of declining prices. It was in 1985, Singapore experienced its first recession since independence.

Meanwhile, food prices rose 2.2% in March, accelerating from February's 2%, helping core inflation rate to edge higher to 0.6% from 0.5% in February. It is the highest figure since September 2015.

Analysts largely expected such a decline in the headline rate hence there was not much market reaction to the data. The Singapore dollar edged higher to 1.3512/USD from the previous close of 1.3542.

The downward headline prices pressures were largely from housing utilities which declined 4.2% in March compared to the 4.1% fall recorded in February and the transport costs that deepened the drop from 2.9% to 4.3%. Communication costs were down 1.8% too.

It was the lower petrol pump prices and lower Certificate of Entitlement (COE) premiums for car purchases that weighed on transport costs, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said on Monday (April 25).

On a month-on-month basis, consumer prices remained unchanged in March, after declining 0.1% in February.

The MAS on Monday reiterated that it expects headline inflation to remain negative throughout the year, and average -1.0 between and 0%. The MAS also maintained that core inflation would come in within the lower half of the 0.5% to 1.5% forecast range this year, after lowering its core inflation guidance on April 14.

On 14 April, the MAS had surprised markets by taking the Singapore dollar off the path of modest and gradual appreciation in order prevent further appreciation in the local currency.

It was a weaker inflation outlook that forced the MAS to tweak the Singdollar's path, and the March data underpins the authorities' view.

"External sources of inflation are likely to remain muted given ample supply buffers in the major commodity markets and weak global demand conditions," the MAS said in a statement on Monday.