Headline inflation rose slower in March by 0.2% y/y while the core inflation eased to 1.5% y/y. We think there is some room for inflation to rise moderately, driven more by a faster pace of wage growth and pickup in domestic demand and lesser on the cost side due to the stronger currency impact. We maintain our CPI forecast of 0.8% for 2018, which falls within MAS range of 0–1% with the core inflation at 1.8%, also within the 1–2% forecast range of MAS.

• Headline inflation rose slower in March by 0.2% y/y from 0.5% y/y in February, while the core inflation eased to 1.5% y/y from 1.7% in February. Weak prices of transport (-0.5% y/y in March) and housing utilities (-2.0% y/y in March), apart from weaker food prices (1.4% y/y in March), were the key factors.

• We think there is some room for inflation to rise moderately as we move ahead, driven by a faster pace of wage growth and pickup in domestic demand. But the upside is limited as retail rents remained subdued and firms’ pricing power constrained by market competition.

• Also, following MAS’ modest to gradual appreciation path in April, the upside pressure from the cost side of the inflation will be gradual owing to the stronger currency which will mitigate import cost.

• We maintain our CPI forecast of 0.8% for 2018, which falls within MAS range of 0–1% with the core inflation at 1.8%, also within the 1–2% forecast range of MAS.

Source: AmInvest Research - 24 Apr 2018