The Fall In Singapore's Consumer Prices Increase Chances For The Central Bank To Maintain Its Current Fiscal Policy

For the fifth month in a row, Singapore's consumer prices continued to fall amid a decline not only in commodity prices around the globe but also in worldwide demand and domestic consumption. These circumstances will increase the central bank chances to maintain its current fiscal policy that aims to support economic growth which was affected by the most severe financial crisis since World War II.

Singapore released today its consumer prices index for the month of August, which rose by 0.4%, yet lower than the previous reading of 1.1%, while it was expected to rise by 0.3; as for the annual reading it fell by 0.3% yet less than the expected fall of -0.4% and the previous reading of -0.5%.

Singapore's Central Bank, unlike many other central banks around the world, uses their local currency to control inflation in the country and with this continued decline in consumer prices for the fifth month in a row the central bank will find more opportunistic to keep their existing fiscal policy and maintain their local currency at its current levels.

It is worth mentioning that the priority for the Singapore's and Asian's policy makers is to maintain growth rates and achieve economic recovery. Therefore, any future changes that will made in their policies will be in accordance to the developments that will be seen in growth levels as well as the stability which will be seen in the global economy since the Asian countries rely mainly on exports.

Singapore's fiscal policy makers will find themselves forced to raise the value of their local currency again in case recovery will start will be seen in the economy. This will increase local demand for various commodities causing a rise in inflation once again, while the recovery expected to start in the world economy in the upcoming months will have an impact on commodities and energy prices, which in return will start putting more upside pressures on inflation.

Food prices in Singapore represent approximately 23% of the countries inflation, and those prices have risen during the month of August by 0.9%, while the costs of transport and communication fell by -0.4% which is the eleventh fall in a row, as for house prices it also fell by -1.6% in August after rising by 0.2% during the month of July.

It is worth mentioning that Singapore's economy may be able to record growth during the second quarter of this year, as indicated by the central bank, which announced that it aims to modify their policies in accordance to the current currency levels in order to avoid any deflationary risks.

Ecpulse

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