Inflation eases to 4.8% in January

But core inflation of basic necessities is rising and will remain high for the next few months.

CPI-All Items inflation, which tracks commonly bought household goods and services, declined to 4.8% yoy for January 2012 from 5.5% from the same period a year ago.

Taking out accommodation and private road transport costs, which are deemed volatile and driven more by supply, from this broader inflation it shows that the MAS core inflation increased to 3.5% in January 2012 from 2.6% from the same period last year.

Volatility is anticipated for both inflation trackers for the rest of 1H12, according to the Monetary Authority of Singapore and Ministry of Trade and Industry in a joint release.

"CPI-All Items inflation will likely remain elevated in H1 2012, while MAS Core Inflation could stay at around 3% in the next few months CPI-All Items inflation on a y-o-y basis will likely remain elevated and volatile over the next few months. Notably, the continued increase in housing rentals, due to a temporary shortage of completed dwellings, will cause imputed rentals on OOA to rise further in the near term. Private road transport cost will remain high on average in view of the tight COE supply, with fluctuations from month to month. In addition, earlier cost increases, especially in the labour market, could continue to pass through to consumer prices and keep MAS Core Inflation at around 3% in the next few months," they said.

"At this stage, the 2012 forecasts for CPI-All Items inflation and MAS Core Inflation remain at 2.5-3.5% and 1.5-2.0% respectively. These projections are predicated on some moderation in domestic and external cost pressures in the second half of the year given the generally sluggish economic environment. MAS and MTI are monitoring price trends closely and will review the forecasts if underlying price pressures turn out to be more persistent," they added.