Headline inflation moderated to 3.6% in January

Will MAS adopt monetary accommodation?

According to CIMB, headline inflation rose a gentler 3.6% in Jan (4.3% in Dec), matching Nov 12’s 27-month low and exceeding consensus and its expectations of +4.0% yoy.

The MAS expects inflation to ease to 3.5-4.5% in 2013 (4.6% in 2012) as the prices of private transportation and housing, the two largest contributors to 2011/12 inflation, subside on the back of higher bases and easing rental reversions.

CIMB expects Singapore’s headline CPI to come in at about 4%. Prices of core items, however, it said could remain sticky (MAS’s 2013 forecast is 2-3%) as higher wages push up service costs in the non-tradable sector.

“While the MAS may lean towards monetary accommodation given “subdued conditions” in the global economy, chances of this happening during its Apr policy review are low, considering the country’s full employment and the persistent pressures on core inflation, notwithstanding today’s reading,”

Here’s more:

Mom SA, prices dipped 0.3% (+1.2% in Dec). The subtler inflation was predominantly the result of lower core and housing inflation. Housing rose
4.4% yoy, the lowest since Nov 10’s +4.0% on base effects.

Due to a shift in Lunar New Year festivities this year, from Jan 12 to Feb 13, food CPI moderated to 1.0% in Jan from 1.5% in Dec, the lowest since Mar 10’s +0.9% yoy. But costlier cars on higher COE premiums bumped up private road transport by 10.5% yoy in Jan 13 vs. Dec 12’s +9.3, and overall transport costs to a 4-month high of 8.5% yoy.

And due mainly to a high-year ago base when it jumped 3.5% yoy in Jan 12 from 2.6% in Dec 11, the MAS’s core CPI moderated to 1.2% yoy, the lowest since Mar 10 on a combination of “cheaper” food, communicationsand healthcare.

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