2012 inflation pegged to reach 'slightly above 4.5%'

Bleak outlook as inflation will remain elevated.

According to MAS, given continued weakness in the global economy, imported inflation will be generally benign, although global food prices could face further upward pressures in the next few months and into early 2013 due to weather-related supply disruptions.

Meanwhile, the persistent tightness in the labour market will support slightly stronger wage increases in 2013, which will continue to be passed through to consumer prices. On the whole, MAS Core Inflation will be broadly stable and average around 2.5% this year and 2-3% in 2013.

CPI-All Items inflation will remain elevated in Q4 2012 and Q1 2013, reflecting significant contributions from imputed rentals on owner-occupied accommodation and car prices.

For the full year, CPI-All Items inflation is likely to come in at slightly above 4.5% in 2012 and ease to 3.5-4.5% in 2013. For both years, accommodation and private road transport costs will together account for slightly over 60% of CPI-All Items inflation, while prices of commodity-related items and services will each contribute around one-fifth.