Singapore's central bank narrows inflation forecast

Singapore's central bank is narrowing its inflation forecast for this year because it expects housing rentals and COE premiums to remain high. 

It now forecasts inflation of between 4.0 percent and 4.5 percent. 

It had previously forecast 3.5 to 4.5 percent. 

Managing Director of the Monetary Authority of Singapore Ravi Menon says bringing down inflation remains one of the central bank's top priorities. 

Official figures Monday showed Singapore's CPI inflation rate rose to 5.3 percent, year-on-year in June from 5.0 percent the previous month. The CPI rose by 5.1 percent in the first half of the year, down from 5.5 percent in the second half of 2011. 

Mr Menon said that MAS' monetary policy has had a restraining effect on inflation and the current policy stance remains appropriate. 

He warns that Singapore's economic growth could dip below 1 percent for 2012 in the event that several downside risks take a turn for the worse. 

These scenarios include a recession in the US, significant escalation of the Eurozone crisis and a hard landing for China's economy. 

Barring that, Mr. Menon says the Singapore economy remains on track to grow between 1.0 percent and 3.0 percent in 2012. 

Still, growth momentum is slowing and the MAS expects average growth in the second half to be lower than the first six months of the year. 

Singapore's gross domestic product grew an average of 4.2 percent in the first half of 2012. 

Mr Menon was speaking at an event to launch the central bank's annual report for the year ended 31 March 2012. 

MAS booked a net profit of S$2.77 billion in 2012, overturning a S$10.9 billion loss in the previous year. 

Mr Menon says the MAS made foreign investment gains of S$12.1 billion, but overall net profit came in at S$2.77 billion due to a strong exchange rate.