Chart of the Day: Inflation will tread higher to 4% by end-2013

But for the mean time, it will ease.

According to DBS, inflation will certainly ease further. While the authority has temporarily lifted the financing curbs to allow car dealers to clear off their existing stocks that were purchased based on the previous financing terms, and COE premiums have recovered partially, most consumers are expected to stay on the side-lines waiting for car prices and COE premiums to fall further. 

Here's more from DBS:

The market is going through an adjustment period before a new equilibrium can be reached.

That implies slower sales and hence, more easing in car prices in the coming months. Indeed, we expect inflation to ease further towards the 3.0% mark in the middle of the year before inching gradually back to 4% by the end of the year (see Chart).

Wage pressure and still high underlying business cost are expected to keep inflation elevated. But factoring in the effect of the COE premiums on inflation,full year inflation is now expected to average 3.6%, against our earlier projection of 4.0%.