Singapore inflation to remain high
Inflation is likely to remain elevated until mid-2012 before easing as the economy slows, the Monetary Authority of Singapore (MAS) said.
In its October Macroeconomic Review, the central bank said inflation will average above 5 per cent for rest of this year.
It may fall to around 4 per cent in the first half of 2012, before easing to close to 2 per cent in the second half of next year.
The MAS pointed out that in an economic downturn, prices tend to moderate either because demand has fallen or because cost pressures have eased.
With the expected economic slowdown, prices of cyclical items such as recreation services are likely to decline.
Domestic cost pressures will also abate as the tightness in the labour market gradually eases.
The MAS said price increases in education and healthcare, which are driven more by wage costs, will also moderate.
It said external price pressures will ease because of a forecast decline in world oil prices and slower global growth.
Nonetheless, the MAS notes that a number of commodities may display significant price increases such as Thai white rice, due to farmers hoarding stock ahead of a government purchasing program and a tighter supply due to the ongoing floods.
For the whole of 2011, Singapore's headline inflation rate is expected to be around 5 per cent, with core inflation at 2 per cent.
In 2012, the forecast for headline inflation is 2.5 percent to 3.5 percent, while core inflation is expected to come in at 1.5 percent to 2 percent.