Higher foreign labor costs to hurt local consumers

With the tightening in foreign labour policy, wage cost pressure will keep core inflation elevated at around 3-3.5% level.

According to DBS, apart from higher transportation costs, domestic inflationary pressure is likely to stay elevated due to higher wage cost. Much has to do with the government measures to tighten the inflow of foreign workers via hikes in levies and reductions in the Dependency Ratio Ceilings.

Here's more from DBS:

Such higher foreign labour costs will surely be passed on to consumers in one way or another. As long as the tightening in foreign labour policy remains in place, wage cost pressure will keep core inflation elevated at around 3-3.5% level. The inflation forecast for 2013 has remained at 2.6% as we expect inflation to gradually ease off from 4Q12 onwards.