January inflation feared to spike up to 1.8%

Blame it on higher COE premiums.

According to DBS, CPI inflation for January due today is expected to report a 1.8% YoY increase.

Although this is up from 1.5% in the previous month, base effect from relatively higher COE premiums last year is still reining back headline inflation.

Here's more from DBS:

But as pointed out several times in the past, such base effect will lapse by April this year.

Inflation is then expected to spike up to 3-4%. Underlying cost pressure within the economy is still high, manifested by the increase in core inflation over the last 12 months.

In fact, core inflation (2.0%) is now higher than headline inflation. Full year inflation will average 3.0%, from 2.4% in 2013.