Global economists are keeping their eyes peeled as key consumer price indicators from around the world signal changing tides for monetary policy. Reports from Singapore, the United States, and Canada on December 23 reveal trends of easing inflation, influencing the strategies of central banks.
Singapore's key consumer price gauge, which measures inflation excluding private road transport and accommodation, rose just 1.9% year-on-year for November, significantly lower than the 2.1% predicted by economists. This marked the smallest increase since November 2021, and experts view it as indicative of the potential for more accommodating monetary policies from the Monetary Authority of Singapore (MAS) early next year.
Headline inflation also fell short of expectations, recorded at 1.6% for the month. Economists now suggest there may be room for the MAS to ease its monetary stance as early as January, particularly as Singapore's GDP growth forecast for 2024 has been revised upwards to 3.5% from the previous 2.0-3.0% range, following strong third-quarter growth.
“The MAS might wait until later in 2025 on the back of incoming US President Donald Trump's policies,” according to Chng Shear Lane’s report. Such remarks indicate how interconnected global economic landscapes are, where the pivot from one major economy can affect others significantly.
Meanwhile, across the Pacific, US Federal Reserve officials are reacting to their own inflation data. The international oil benchmark, Brent crude, experienced a 0.20% increase, achieving $72.79 per barrel on the back of lower-than-expected inflation figures. This development refocuses market expectations on the Fed's potential policies going forward.
The latest data highlighted consumer spending growth of just 0.4% for November, paired with personal income growth at 0.3%. The core personal consumption expenditures (PCE) price index — the Fed's preferred measure of inflation — climbed just 0.1% month-to-month and 2.8% year-on-year, providing room for speculation surrounding future interest rate cuts.
“The Fed is expected to maintain higher policy rates for an extended period to curb inflation,” stated Handan Kazanci of Anadolu Agency. Fed officials, including President of the New York Fed John Williams, noted the incoming administration's policies will likely affect economic conditions, especially concerning inflation trajectories.
Marrying lower inflation rates with rising oil prices, many traders anticipate fluctuations yet tempered by fears related to slowing Chinese demand and the possibility of oil surpluses next year.
North of the border, the Bank of Canada made headlines by slashing its key interest rate by half a percentage point, bringing it down to 3.25%. This second consecutive outsized rate cut came amid slowed economic growth and declining inflation levels.
“First, with inflation at two per cent and the economy in excess supply, monetary policy no longer needed to be clearly restrictive,” summarized Nick Murray from The Canadian Press. The bank's strategy reflects their growing concerns about economic sluggishness and aims to maintain inflation near its target.
Central bank members are also reassessing the impacts of reduced immigration targets, which are now projected to be around 395,000 for the next year, down from the previously anticipated 500,000. This change may lead to lower GDP growth than earlier forecasted, leaving economists grappling over the broader impacts these adjustments could engender.
“Members acknowledged the increased uncertainty could already be affecting the outlook, particularly for business investment,” Murray noted, highlighting the interplay between domestic policy shifts and broader economic indicators.
Looking forward, it remains uncertain how global economic pressures—including inflation trends and central bank responses—will continue to shape market behaviors and strategic adjustments from policymakers. With central banks poised to navigate through these uncharted waters, stakeholders must stay alert to looming decisions and potential policy shifts on the horizon.