5. Inflation Dynamics and Expectations in Singapore

Inflation dynamics in Singapore have primarily been shaped by foreign factors, including global inflationary pressures and external macroeconomic shocks. More recently, the normalisation phase of the Covid-19 pandemic crisis has led to domestic price pressures from pent-up demand and supply chain disruptions. Meanwhile, the war in Ukraine has resulted in a hike in the global prices of food, energy, and industrial commodities. Using inflation forecasts from the MAS Survey of Professional Forecasters as our measure of inflation expectations, we show that short-term inflation expectations started shifting up particularly in 2022. Moreover, greater disagreement amongst survey respondents in the 2022 quarter one survey suggests individual short-term inflation expectations may also be slipping. The Monetary Authority of Singapore (MAS) has promptly responded to the elevated price pressures by repeatedly tightening monetary policy. Such forceful policy responses reveal the central bank’s resolve to maintain price stability, which will help to ensure that inflation expectations in Singapore remain anchored.