Singapore inflation on track for further easing

Inflation will simmer below the raging levels seen in H1 2012 but will still remain above its historical average, says the government.

For the whole year, CPI-All Items inflation is likely to come in at the upper half of the 3.5-4.5% forecast range while MAS Core Inflation will average between 2.5-3.0%, based on the official outlook from the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry in a joint release accompanying the June 2012 inflation data.

"The pass-through of wages and other business costs to consumer prices will continue, but at a more moderate pace than that seen earlier this year. At the same time, the earlier weakness in global commodity prices will dampen pressures on domestic prices of oil and food items in the near term," they said, which will drag down MAS Core inflation for the latter half of the year.

"Accommodation cost inflation, while moderating, has been stronger than expected, as leasing contracts continue to be renewed at rentals that are considerably higher, especially in the HDB segment. COE premiums have risen sharply recently and will remain at elevated levels, given the further reduction in COE supply from August 2012. CPI-All Items inflation is still expected to be lower on average in H2 2012 compared to H1, but will remain above its historical average," they added.