Singapore inflation to pick up on tight job market

Source: Business Times

By: BT Correspondent

Singapore is expected to see inflation pick up in the next few quarters before tapering off towards the end of 2014, the central bank said on Tuesday, as cost pressures arise from efforts to stem the flow of foreign workers to the city-state.

"In the next few quarters, an anticipated rise in labour demand will come up against binding labour supply constraints across more sectors of the economy," the Monetary Authority of Singapore (MAS) said in its half-year macroeconomic review.

"Coupled with the low base in the past year, core inflation will rise on a year-ago basis to reach around 2.5 per cent in Q2 and Q3 2014," the central bank said. Its review discusses in detail the various assumptions and forecasts used to determine monetary policy.

MAS earlier this month said it would continue to allow a modest and gradual appreciation of the Singapore dollar as core inflation was likely to appreciate, sending the local currency higher against its US counterpart.