Consumer prices rose faster than experts had expected in February. According to the Monetary Authority of Singapore, inflation rose 4.9% in February compared to a year ago. The pick-up in prices was attributed to the jump in the cost of car ownership.
No one can dispute the jump in COE premiums for the rise in inflation in February. It would seem that car ownership is more affordable thanks to low interest rates that have driven down the cost of borrowing.
However, what has been good news for borrowers has been disappointing for savers. Low interest rates have not only pushed down borrowing rates but sent savings rates to abysmally-low levels too.
Long-term savers looking for respite from income shares will have their work cut out for them. According to S&P Capital IQ, there are no blue chip shares yielding more than 4.9%.
That said, a handful of mid-caps are still sporting above-inflation dividend yields. These include Hutchison Port Holdings Trust (SGX: NS8U) and Singapore Post (SGX: S08). There are swathes of property companies that also boast inflation-beating yields too. These include Mapletree Industrial Trust (SGX: ME8U), Ascott Residence Trust (SGX: A68U) and Keppel REIT (SGX: K71U).
We can ponder all we like about the causes of inflation. I have my own theory about why prices are rising not only here in Singapore but elsewhere in the world too. However, what is important for all of us is to ensure that our long-term savings are not damaged by rising prices.
If inflation persists at 4.9%, it means that $100 today will only have the buying power of $95.10 after one year. And after five years it will only have three-quarters of the buying power it has today. That’s why it is important to look for investments that could beat inflation over the long term.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.