Inflation report
THE Consumer price index (CPI) for June is expected to rise by 2.2% year-on-year (y-o-y), according to Bloomberg estimates.
The country’s inflation rate climbed to 2% in May compared with a 1.8% hike in April.
According to Trading Economics global macro models and analysts’ expectations, the inflation rate is expected to be 1.6% by the end of this quarter.
TA Research said both headline and core inflation averaged 1.8% in the first five months of 2024.
The research firm said that for the year as a whole, headline and core inflation are expected to average within the earlier projected ranges of 2% to 3.5% and 2% to 3%, respectively.
Meanwhile, Bank Negara is expected to announce its international reserves as at July 15 this week.
MAS decision
The Monetary Authority of Singapore (MAS) will publish its July statement on monetary policy this week.
ING expects MAS to maintain all policy settings, narrow the gross domestic product forecast range from 1%-3% to 2%-3%, and keep core and headline inflation forecasts for 2024 at 2.5% to 3.5%, with some upside risk.
UOB Global Economics & Markets Research said the recent increase in imported and external inflation warrants close monitoring, it may be prudent for MAS to maintain the current restrictive Singapore dollar nominal effective exchange rate slope settings a little bit longer.
Therefore, UOB has postponed its base case for the start of policy normalisation (via a slight slope reduction) to October 2024, although a July move remains possible.
China’s LPR
ACCORDING to a Bloomberg poll, eight out of 10 analysts polled expect the one-year and five-year loan prime rate (LPR) fixings to be unchanged at 3.45% and 3.95%, respectively.
The two analysts expect both LPR fixings to be increased by five basis points (bps) to 3.50% and 4%.
UOB expects no changes to the fixings in July.
Instead, it believes the start of the Federal Reserve’s rate cuts, expected in September 2024, will create space for further monetary policy easing by the People’s Bank of China.
As such, UOB expects the one-year LPR to fall to 3.20% by the end of fourth-quarter 2024 (current 3.45%) while the five-year LPR may stay on hold at 3.95% through the rest of 2024 after the 25-bps reduction earlier in February.
