MasterCard and SMU Research Shows Slowing Global Growth and Low Interest Rates in Foreseeable Future as Two Possible Reasons  

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Singapore, 22 October 2012 – Singapore households are expecting inflation to rise due to perceived low interest rates and excess liquidity in the foreseeable future, according to the latest findings of the SKBI-MasterCard Singapore Index of Inflation Expectations (SInDEx).

The SInDEx, which was jointly developed by Singapore Management University’s Sim Kee Boon Institute for Financial Economics (SKBI) and MasterCard, is derived from an online survey of around 400 randomly selected individuals from Singapore households.

The online survey helps researchers understand the behaviour and sentiments of decision makers in Singapore households. This is the fifth wave of the quarterly survey conducted under the collaboration and the indices were officially launched in January 2012. SInDEx was co-developed by Dr Aurobindo Ghosh and Professor Jun Yu from SMU SKBI.

In the latest survey conducted in September this year, consumers shared their views on perceived values of economic variables over the next one to five years.

Comparing the two waves of surveys conducted in June and September 2012, consumers expect inflation to inch higher. Their perception of the One-year-Ahead headline inflation (CPI-All Items) has gone up from 4.45% in June to 4.57% in September. At the same time, the forward looking SInDEx1, a composite weighted index of One-year-Ahead inflation expectations, has consequently increased to 4.57% (from 4.4% in June).

The long term Five-year-Ahead overall (or CPI-All Items) Inflation expectations went up to 5.56% in September. The Five-year-Ahead Singapore Core Inflation rate (excluding accommodation and private transportation) is at 5.2% in the September wave, which is higher compared to 4.91% in June. This shows that, besides housing and private transportation, respondents also perceived a rise in commodities prices.

The composite Five-year-Ahead Singapore Index of Inflation Expectations (SInDEx5) in September 2012 has consequently increased to 5.35%, from 5.08% in the survey conducted in June 2012.

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Fig 2.

Dr. Aurobindo Ghosh, co-creator of SInDEx, and Programme Director of SMU SKBI said, “The slowdown of global economic activities and persistent unemployment in western economies  have sent warning signals to policymakers on the urgency to create new jobs,  thus resulting in expansionary monetary policies. These events might have created a perception that “smart money” will start flowing to financially and economically sound markets in Asia like Singapore.

“With an impending slowdown of growth in India and China compared to their recent historic averages, Singapore is probably as good a bet as any other investment destination. This expected influx of “smart money” might have led to an increase in the medium and long term inflation expectations particularly through the real estate sector. This perception, coupled with domestic price pressures due to rising private transportation costs might have exacerbated the overall inflation expectations, although the price of oil and some other commodities have significantly eased in recent times.” Dr. Ghosh observed.

Dr. Yuwa Hedrick-Wong, global economic advisor, MasterCard Worldwide said, “The global economic outlook today is affected by an unprecedented level of uncertainty, possibly the worst in over half a century. Accordingly, the increase in inflation expectation in Singapore reflects consumers’ concern over both domestic conditions as well as the global economy. The significant rise in the Five-Year Ahead expectation especially suggests that Singapore consumers are troubled by the persistent uncertainty in the global economic environment.”



Two indices were created, SInDEx1 and SInDEx5, to measure the 1-year inflation expectations and the 5-year inflation expectations. The data for the SKBI-MasterCard Survey was collected online from about 400 consumers. The sampling was done using a quota sample over gender, age and residency status to ensure representativeness of the sample. Employees in some sectors like journalism, marketing were excluded as that might have an effect on their responses to questions on consumption behaviour and expectations.

About Singapore Management University

About the Singapore Management University

A premier university in Asia, the Singapore Management University (SMU) is internationally recognised for its world class research and distinguished teaching.  Established in 2000, SMU’s mission is to generate leading edge research with global impact and produce broad-based, creative and entrepreneurial leaders for the knowledge-based economy.  It is known for its interactive and technologically-enabled pedagogy of seminar-style teaching in small class sizes.

Home to more than 7,200 students, SMU comprises six schools: School of Accountancy, Lee Kong Chian School of Business, School of Economics, School of Information Systems, School of Law and School of Social Sciences, offering a wide range of bachelor’s, master’s and PhD degree programmes in various disciplines.

With an emphasis on generating rigorous, high impact cross-disciplinary research that addresses Asian issues of global relevance, SMU faculty collaborates with leading foreign researchers as well as partners in the business community and public sector through its research institutes and centres.

About Sim Kee Boon Institute for Financial Economics

Established in July 2008, the Sim Kee Boon Institute for Financial Economics (SKBI) at the Singapore Management University promotes the study of Financial Economics and Financial Econometrics in areas of strategic relevance to Singapore’s economy and the economies of the region. A significant addition to Singapore’s efforts to be a financial hub in Asia, SKBI is a leading institute for academic research with strong industry application and practical dimension in the area of Financial Economics.

The Institute has four major research centres for quantitative financial analysis and offers training programmes for professionals in the financial industry. Its work is conducted in close collaboration with leading scholars in financial economics and financial econometrics from around the world as well as leading international organisations and experts from industry.


About MasterCard Worldwide
MasterCard (NYSE: MA),, is a global payments and technology company. It operates the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MasterCardNews, join the discussion on the Cashless Conversations Blog and subscribe for the latest news.


Media contacts:

Kong Hwee Ting, SMU, +65 6808 5238,

Gladys Ng, SKBI, SMU, + 65 6808 5229,

Georgette Tan, MasterCard Worldwide, +65 6390 5971,

Rob O’Brien, Weber Shandwick, +65 6825 8064,