Core inflation will pick up gradually into early 2015 before easing in the second half: MAS

While core inflation is set to rise, overall inflation has declined to an average of 1 per cent in the two month period of July to August 2014. The CPI-All Items inflation is forecast to be 1-1.5% this year, given the recent weakness in car prices. -
While core inflation is set to rise, overall inflation has declined to an average of 1 per cent in the two month period of July to August 2014. The CPI-All Items inflation is forecast to be 1-1.5% this year, given the recent weakness in car prices. -- PHOTO: ST FILE

SINGAPORE - Core inflation is expected to pick up gradually into early next year, before easing in the second half of 2015, the Monetary Authority of Singapore (MAS) said in its monetary policy statement on Tuesday morning.

Core inflation is forecast to average 2-2.5 per cent in 2014 and 2-3 per cent in 2015.

Core inflation is a measure of everyday out-of-pocket costs; it excludes private road transport and accommodation costs.

While core inflation is set to rise, overall inflation has declined to an average of 1 per cent in the two month period of July to August 2014. The CPI-All Items inflation is forecast to be 1-1.5% this year, given the recent weakness in car prices. For next year, it is projected at 0.5-1.5%, reflecting also the impact of muted housing rentals.

MAS said that imported food inflation was also elevated because of the higher cost of food from the region. Domestic food inflation could be affected by higher prices of regional food supplies.

External price developments are not expected to affect inflation negatively as there is amply supply in the major commodity markets.

But with the Singapore economy at full employment, wages are likely to increase and this will affect prices, in particular prices of services items including healthcare and education.

sushyan@sph.com.sg