, Singapore

Stubbornly high inflation likely to persist

Brace for higher COE premiums by early 2013.

According to Bank of America Merrill Lynch, headline inflation may stay elevated despite slowing global growth.

Here's more from BofAML:

Private transport costs and COE premiums will stay high and may accelerate in early 2013.

Vehicle growth rate will be further reduced to +0.5% each year from Feb 2013 to Jan 2015, from the current +1%.

An additional 4,789 adjustments (due to over-projections in 2008 and 2009), which had been deferred for one year, will resume from Aug 2013 to Jan 2015, cutting COE supply further next year.

Wage cost pressures may remain high, given the tight labor market (unemployment rate at 2%) and strict foreign worker policy. This will keep CPI components such as healthcare and education elevated.  

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