Singapore inflation pegged to hit 2–3% in 2014

Fluctuations in car prices seen.

According to the Monetary Authority of Singapore, for the year as a whole, MAS Core Inflation is anticipated to rise from 1.5–2% in 2013 to 2–3% in 2014, while CPI-All Items inflation is projected to be 2.5–3% in 2013 and 2–3% in 2014.

Imputed rentals on owner-occupied accommodation and cars will together account for around half and a third of CPI-All items inflation in 2013 and 2014 respectively. Services fees will contribute around one-third to overall inflation in both years, and commodity-related items will make up less than a quarter.

Sequential core price increases are expected to pick up to slightly above their historical average over the next
few months, as domestic cost pressures manifest more prominently. Coupled with the low base in the past year, core inflation will rise on a year-ago basis to reach around 2.5% in Q2 and Q3 2014. 

Towards the end of next year, it should ease as base effects become more favourable.

Overall CPI inflation, however, will be volatile due to possible fluctuations in car prices. On a sequential basis, it is projected to remain elevated until Q1 2014, before decelerating rapidly thereafter.

On a y-o-y basis, it is expected to reach around 3.5% in Q2 2014 on account of the exceptionally low base a year ago, when COE premiums corrected significantly. It could then ease to below 2% in Q4.