Inflation seen to ease in 2012

Singapore government pegs CPI inflation at a subdued 2.5-3.5% range or roughly half that of 2011.

But expect the cost of accommodations to rise first in the coming months, pushing inflation further upward, said the Monetary Authority of Singapore and Ministry of Trade and Industry Singapore in a joint release.

Cost pressures will eventually ease in the latter half of the year on the back of slower local and global growth.

"Year-on-year inflation in CPI-All Items will likely remain elevated over the next few months. Notably, the continued increase in housing rentals, due to a temporary shortage of completed dwellings, will cause imputed rentals on OOA to rise further in the near term. Private road transport cost is expected to remain firm in view of the tight COE supply," said MAS and MTI.

"Meanwhile, MAS Core Inflation will likely face some upward pressure in the next few months due to the ongoing pass-through of earlier cost increases. However, the continued sluggishness in domestic economic activity will reduce the tightness in the labour market and alleviate cost pressures over the coming months. Barring an escalation of geopolitical tensions in the Middle East that could potentially affect oil prices, inflationary pressures emanating from abroad should also ease, given subdued global growth prospects," they added.

"For the whole of 2012, CPI-All Items inflation and MAS Core Inflation are forecast to be 2.5-3.5% and 1.5-2.0% respectively. ccommodation costs will account for close to half of inflation in CPI-All Items, while the prices of food and services will each account for around one-fifth," they said further.