CONTENTS
HOME
OUR WORK - Managing Risks, Sustaining Growth
A MORE CHALLENGING POLICY ENVIRONMENT
MONETARY POLICY - PROVIDING AN ANCHOR FOR PRICE STABILITY OVER THE MEDIUM-TERM
MANAGING THE CHALLENGES OF INCREASED GLOBAL FINANCIAL UNCERTAINTY
A SOUND AND PROGRESSIVE FINANCIAL CENTRE
CURRENCY
 
A MORE CHALLENGING POLICY ENVIRONMENT 12
 
Slowing in the G3 Economies 12
 
Asia Remains Resilient 13
 
Inflation Is On The Rise Globally 13
 
Singapore Is Not Immune To Global Growth and Inflation Risks 14
 

Inflation Is On The Rise Globally

After a period of generally benign price pressures from 2001 to 2006, global inflation has since risen sharply. The ongoing escalation in commodity prices has been an important contributing factor. The price of crude oil, for instance, reached an unprecedented US$140 per barrel in June 2008, approximately double that of a year ago. More worrying, the rise in commodity prices appears to have spread from oil and metals to soft commodities such as wheat, corn and rice in recent quarters.

Thus, headline inflation in a number of developed economies has picked up despite the slowdown in growth. CPI inflation in the US, for example, rose to 4.1% in the first quarter of this year, the highest in nearly 17 years. Headline inflation in the Eurozone, averaging 3.4% in the first five months of this year, has exceeded the European Central Bank's (ECB) implicit target. While Japan experienced slight deflation in the first three quarters of 2007, inflation accelerated in the last two quarters to reach 1% in Q1 2008, the highest in ten years.

Inflation has also emerged as a key concern in other Asian economies. Domestically, years of rapid growth have led to overheating in a number of fast-growing countries, such as Vietnam and China, as cost pressures accumulate. Headline inflation in China, for example, has picked up sharply to 8% in Q1 2008, up from 2.7% a year ago. In Vietnam, it rose to 16.4% in Q1 2008, from 6.6% a year ago. Inflation also increased to 8.9% in India in May 2008 as a result of rising food and energy prices.2

2 Based on the Wholesale Price Index, a widely-followed inflation gauge in India.