The original version of this article first appeared in The Business Times.
THINGS have become more expensive. We call it inflation. But that also includes the cost of money — reflecting in interest rates — which has followed inflation higher.
Higher prices eat into the purchasing power of individuals, meaning that with the same money, we can buy fewer things. Higher interest rates are a tax on income as we pay more for mortgages and borrowings, and so have less money left over. Higher interest rates also lower the relative attractiveness of earnings at companies, and the coupon that bonds pay.
Singapore’s headline inflation surged in March at the fastest pace in about a decade to 5.4 per cent from a year ago, as the cost of everything from food, housing, cars to services rose. Core inflation (that excludes accommodation and private transport) rose 2.9 per cent from a year ago....