Chart of the Day: Singapore's core inflation to hit 2% in 2H

Slightly above historical average.

According to the Monetary Authority of Singapore, sequential core price increases are likely to strengthen in the second half of 2013 when the economic outlook turns more favourable and cost pressures rise. 

Core inflation is likely to be slightly above its historical average and similar to what was envisaged in the October 2012 monetary policy review.

The overall CPI will be volatile mainly due to private road transport costs, which will continue to incorporate the effects of the recent motor vehicle policy measures.

In EPG’s baseline forecast, COE premiums are assumed to average around current levels. An alternative scenario, where COE premiums return to their levels before the measures were introduced, was also considered.

On a year-ago basis, core inflation is likely to stay at slightly above 1.5% in H1 before rising gradually to around 2.0% at the end of the year.

In comparison, CPI-All Items inflation is forecast to fall from 4.0% in Q1 2013 and remain broadly stable at below 3% for the rest of the year, assuming COE premiums stay at around current levels. In the alternative scenario, CPI-All Items inflation is projected to decline temporarily in Q2 and then rise to around 3.5% in Q4.