Expect higher food, services costs in 2015: MAS

Blame it on higher wages.

The Monetary Authority of Singapore today stated that the country’s Core Inflation is projected to stay above its historical average over the next few quarters, even as CPI-All Items inflation remains subdued.

MAS Core Inflation, which excludes private road transport and accommodation costs, averaged 2.2% y-o-y in July–August, similar to Q2 and up from 2.0% in Q1 2014. This relatively firm outcome was largely due to continued pass-through of higher wages and other business costs to the prices of consumer services.

The MAS noted that domestic food inflation could be impacted by higher prices of regional food supplies. At the same time, with the economy at full employment, wages should continue to increase and filter through to prices, in particular, of services items for which demand remains firm, such as healthcare and education.

On a year-ago basis, MAS Core Inflation is projected to pick up gradually into early next year, before easing in the second half of 2015. MAS Core Inflation is forecast to average 2–2.5% in 2014 and 2–3% in 2015.