Inflation easing still a long way off

Expect a few more months of elevated prices before inflation comes off its year-long highs.

The second half of 2012 promises a gradual moderation in both CPI-All Items inflation and MAS Core Inflation, said the Ministry of Trade and Industry (MTI) in its latest inflation forecast, with both indices closing the year at 3.5-4.5% and 2.5-3% ranges, respectively.

"Accommodation cost will remain the largest contributor to CPI-All Items inflation this year as leasing contracts continue to be renewed at rentals that are considerably higher than those under existing contracts, especially in the HDB segment," said MTI.

"Car prices could also increase if COE premiums rise further in response to the tight COE supply. In addition, wages and other costs will likely continue to pass through to consumer prices, albeit at a more moderate pace than that during early this year," it added.

"MAS Core Inflation will remain close to 3% in the next few months before easing gradually thereafter. For the year as a whole, CPI-All Items inflation is expected to be 3.5-4.5% while MAS Core Inflation will likely be in the range of 2.5-3.0%. Costs of accommodation and cars will together account for more than half of CPI-All Items inflation, while services and commodity-related items will each account for one-fifth," it said further.

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