FXstreet.com (Barcelona) - The MAS appears to downplay the recent fall in core inflation, saying that it expects upward pressure from higher food and services costs. More importantly, the central bank said “persistent tightness in the labor market will support slightly stronger wage increases in 2013, which will continue to be passed through to consumer prices.”
According to Irene Cheung, FX Strategist at ANZ, “Indeed, we see little relief in core inflation, which it now expects to average 2%-3% in 2013, compared to an expected 2.5% for this year and the central bank’s perceived comfort zone of below 2%. We consider sustained pressure on core inflation as the prime reason for today’s policy decision.”
As such, “it appears that the concern over inflation could extend further out as the government continues to push for a restructuring of the economy toward higher productivity and a lower dependency on foreign labor.” Cheung notes. The central bank said today that the policy stance is assessed to be appropriate in containing inflationary pressures and keeping the economy on a path of restructuring towards sustainable growth.
According to Irene Cheung, FX Strategist at ANZ, “Indeed, we see little relief in core inflation, which it now expects to average 2%-3% in 2013, compared to an expected 2.5% for this year and the central bank’s perceived comfort zone of below 2%. We consider sustained pressure on core inflation as the prime reason for today’s policy decision.”
As such, “it appears that the concern over inflation could extend further out as the government continues to push for a restructuring of the economy toward higher productivity and a lower dependency on foreign labor.” Cheung notes. The central bank said today that the policy stance is assessed to be appropriate in containing inflationary pressures and keeping the economy on a path of restructuring towards sustainable growth.
