The red-hot inflation figures reaffirm that price pressures are across all sectors and almost all industries and broadly throughout the whole American economy which inadvertently reduces purchasing power of the mass population.
Geopolitical risks including Covid lockdowns in China and Russia’s war in Ukraine also pose risks to supply chains and the inflation outlook.
Real estate professional Kiwi Lim from Huttons Asia believe this latest inflationary data may keep Federal Reserve officials on an aggressive policy course to slow down inflation by reducing demand as President Biden & his government has seen support dropping sharply ahead of midterm elections.
Singapore home loan interest rates may hit 3.5% by the end of 2022 and 4% by mid of next year. However several factors such as limited supply, labor shortage, higher manpower cost and higher construction costs will continue to see housing prices in Singapore on an upward trend but at a much slower rate as compared to last year.
The rapid currency depreciation is a big challenge for the European Central Bank (ECB), given that the euro was trading close to US$1.15 just a few months ago in February. The scenario of a "complete gas shutoff" from the very important Nord Stream 1 pipeline which carries fossil fuel supply from Russia could have contributed to the loss of confidence in the European market and this has a major impact for consumers in the €12 trillion (S$17 trillion) economy, as a depreciated currency will feed an inflation spike that is already out of control, with prices rising at a record pace close to 9 per cent.
"The flour that makes the bread is not getting any cheaper, how do you expect the price of bread to stay the same?" Kiwi Lim felt that oil prices must not go beyond its current average of US$100 per barrel in order to manage inflation. But winter is arriving in Europe, if Russia decides to cut its oil and gas to Europe due to the Russia - Ukraine war, prices of fossil fuel may continue to go up as the season turns cold by the end of the year for Europe. Oil and gas affects almost every industry and business sector, especially transport and logistics and this may add upward price pressures of goods and services in spite of the Fed's increase in interest rates.
On the bright side, Fixed Deposits in Singapore may see higher interest rates, probably to the tune of 3% annual interest offered by banks in Singapore towards the end of this year.