Chart of the Day: Singapore High Domestic Inflationary Pressure

CPI inflation for January likely moderates to 4.7% from December’s 5.5% but upside risk remains says DBS.

CPI inflation for Jan12 will be announced today. DBS expected full year inflation to stay at an average 3% but warns of upside risks.

“It’s mainly base effect at work, leading to the sharp drop in the headline number. Global disinflationary pressure from slower growth momentum may haveGlobal disinflationary pressure from slower growth momentum may have some impact too,” said DBS noting however that rising political tension in Middle-east leading to higher oil prices may pose upside risk to Tradable inflation.

“Strong domestic inflationary pressure arising from higher rental and escalating labour cost will also continue to keep inflation elevated In fact, domestic supply side pressure is currently the key driver of inflation in Dec11.