Monetary Authority of Singapore Annual Report 2012/2013
Anchor of Economy

THE ECONOMY — GLOBAL, REGIONAL AND DOMESTIC

Global Inflation was Subdued as Commodity Prices Eased

Global inflation was subdued for much of 2012, as food and energy prices declined or registered smaller increases due to easing supply disruptions. This exerted downward pressure on consumer prices in the G3, reinforced by slowing growth and excess capacity. As a result, headline inflation in the G3 fell from 2.4% y-o-y in Q1 2012 to 1.7% in Q4. In Asia ex-Japan, inflation also declined markedly to 4% in 2012 from 5.6% in 2011, although core inflation was more persistent due to tight labour markets and high resource utilisation.

In the first three months of 2013, headline inflation picked up again in Asia ex-Japan, as several economies were operating close to, or even above, their potential output levels and came up against supply side constraints. In response, some Asian countries increased infrastructure spending to relieve supply bottlenecks and implemented macroprudential measures to guard against excessive credit growth and asset bubbles.