By Ambar Warrick
Investing.com-- Singapore’s CPI inflation index hit a 14-year high in July, data showed on Tuesday, driven largely by mounting food and fuel prices.
The reading now puts more pressure on the Monetary Authority of Singapore (MAS) to tighten monetary policy and temper runaway inflation.
The city state’s consumer price index grew at an annual rate of 7% in July- its highest pace since 2008. The reading was in-line with expectations, and higher than June’s showing of 6.7%, according to data from the Department of Statistics.
Core CPI inflation, which is the MAS’ preferred inflation gauge and excludes private housing and transportation expenses, grew by 4.8% in July, higher than expectations of 4.7%.
Transportation costs, particularly fuel, were by far the biggest driver of inflation through July, registering a 19% annual increase.
The MAS said in a press release that global inflation is likely to stay elevated in the near-term, keeping the prices of key commodity imports elevated.
The central bank projected that core inflation will stay elevated in the coming months, but flagged strength in Singapore’s labor market and business activity.
The MAS maintained its annual CPI outlook of 5% to 6%, with core CPI expected to taper slightly to 3% to 4%.
“Fresh shocks to global commodity prices, as well as domestic wage pressures remain as upside risks to inflation,” the MAS said.
The central bank has been consistently, but gradually raising interest rates in the face of rising inflationary pressures on the island state. The bank is set to decide on monetary policy in October, and has so far telegraphed more tightening as it deals with rising cost pressures.
A slowdown in Singapore’s trading partners, mainly China, has also buffeted the economy this year. The MAS recently revised its second-quarter GDP lower, and slightly trimmed its expectations for annual economic growth.
The Singapore dollar showed little reaction to Tuesday's inflation data, trading sideways around 1.3980- a one-month low to the greenback.