Commerzbank notes USD/SGD rose 0.3% to 1.2970 and has been grinding higher since mid-June on broader Dollar strength. Singapore’s May inflation stayed at 1.8% year-on-year, below expectations, but MAS and MTI still see upside risks as higher energy costs filter through supply chains, even as domestic services inflation moderates with easing labour cost pressures.

Singapore inflation risks keep MAS vigilant

"May inflation was softer than expected at 1.8% yoy (Bloomberg consensus: 2.0%), unchanged from the reading in March and April. The continued moderation in services inflation helped offset rising price pressures in food and transportation."

"The Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) expect inflation to rise in the coming months. They highlighted that “higher energy costs pass through global supply chains with a lag” although domestic service inflation is expected to ease as labour costs pressures moderate."

"Overall, inflation risks remain tilted to the upside, particularly if energy bottlenecks and input shortages persist longer than expected, thereby pushing up imported inflation. However, weaker global growth amid tighter monetary policy could act as a countervailing force, easing price pressures."

"In FX, USD/SGD rose 0.3% to 1.2970 yesterday. The pair has been steadily rising since mid-June driven by a stronger USD."

"Core CPI, which excludes private transportation and accommodation, rose less than expected to 1.4% (Bloomberg consensus: 1.6%), unchanged from April. This suggests that price pressures are contained within the energy sector and have not broadened beyond."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)