Higher car prices seen to push inflation to 2.6% this year

Will it nudge beyond the 3% mark?

According to CIMB, higher car prices on the back of the recovery in COE premiums due to an imminent re-categorisation of COEs could nudge CPI inflation beyond 3% in the coming months. Hence, we are raising our 2013 forecast from 2.3% to 2.6%.

The MAS maintains its 2013 forecast of 2-3%, though it now believes that  inflation is likely to come in at the upper end of that range (9M13: 2.5%).

Here's more from CIMB:

A high year-ago base and smaller-than-expected pass-through of higher COE premiums tempered CPI growth from 2.0% yoy in Aug to 1.6% yoy in Sep. Core inflation dipped from 1.8% yoy to 1.7% on the back of “cheaper” food and clothing & footwear.

However, inflation may rebound to 3% or higher in 4Q13, driven by costlier private transportation. The government now expects 2013 CPI to “come in at the upper half of the 2-3% forecast range”. We raise our 2013 forecast from 2.3% to 2.6%.