Singapore's 2013 inflation forecast dips to 3-4%

As government maintains policy rate.

According to CIMB, on the back of recent measures to contain housing and private transport costs, the MAS now expects inflation to ease to 3-4% in 2013 vs. its previous forecast of 3.5-4.5% (4.6% in 2012).

Here's more:

While economic growth in 1Q13 was below expectations, there was no surprise from the MAS this morning.

Considering the country’s full employment and the persistent pressures on core inflation, the MAS is maintaining its policy of a modest and gradual appreciation of the S$ nominal effective exchange rate (S$NEER). There is no change to the centre, slope and width of the S$NEER policy band.

We expect Singapore’s headline CPI to come in at about 4%. Prices of core items, however, could remain sticky as higher wages push up service costs in the non-tradable sector.

Nonetheless, the MAS is also lowering its forecast for core inflation from 2-3% to 1.5-2.5% because of “weaker-than-expected price increases over the past few months.” We maintain our 2% forecast for the full year for now.

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