By Romesh Navaratnarajah: Singapore's inflation rate dipped to five percent in May, a slight drop from the 5.1 percent previously forecasted by economists.
While risks have shifted from inflation towards growth, many economists remain doubtful that the central bank will ease its policy in October.
The consumer price index (CPI) grew a smaller five percent year-on-year in May, down from April's 5.4 percent.
Meanwhile, the MAS core inflation, which strips out accommodation and private road transport costs, stayed firm at 2.7 percent as lower inflation of oil-related items was replaced by slightly stronger services and food inflation.
In a joint statement, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said that headline inflation is expected to ease gradually in H22012 after averaging five percent in the first quarter.
For the full year, headline inflation is expected to grow from 3.5 to 4.5 percent while core inflation will climb from 2.5 to three percent.
According to Leong Wai Ho, an economist at Barclays Capital, inflation will stay above five percent in June before slipping to around four percent in July.
But the inflation rate is expected to fluctuate from month to month, according to MAS and MTI.
In addition, accommodation costs are expected to be a major source of volatility as HDB rental rebates and service and conservancy charges (S&CC) were released in June, September and December last year and discontinued in March this year leading to uneven base effects. Related Stories: Inflation a major concern for baby-boomers: survey
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