See how wage hikes could fuel inflation risks in 2014

Inflation seen rising to 3.3%, says UOB.

In its inflation outlook for 2014, UOB said that CPI Inflation risks will likely come from segments which are "labour intensive in their production process," specifically the healthcare, cooked food, education, and recreation segments.

Given this outlook, UOB sees CPI inflation to shoot up almost a full percentage point to 3.3% in 2014 over the previous year.

"With the domestic labour market expected to remain tight in 2014, employers will have to out-bid each other in order to attract workers, and this will result in wage increases which in turn, will likely be passed onto higher consumer prices," said UOB.

"In comparison, we believe that accommodation costs increase should moderate further in 2014 on the back of more housing supply coming on stream this year."

"However, with the expectations of a tight labour market and higher industrial rental prices, we maintain our view that CPI inflation may average a higher 3.3% in 2014, from 2.4% in 2013."

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