ST : Inflation could hit 4%

Dec 11, 2009
Inflation could hit 4%
By Fiona Chan

INFLATION could hit a high of 4 per cent in the next six months on account of the surge in asset prices here, according to a new report by HSBC.

It said investors feeling rich from the stock market rally are likely to spend more, raising demand - and prices - for goods and services.

At the same time, a continued increase in property prices will also lead directly to a rise in inflation.

This will help boost the consumer price index - the key indicator of inflation here - next year, said HSBC economist Robert Prior-Wandesforde.

He has raised his inflation forecast for next year to 2.9 per cent from 2.5 per cent previously, with inflation expected to peak at about 4 per cent probably in the second quarter of next year.

Investors who have directly made money from shares will naturally spend more, helping fuel inflation, but even people who do not buy shares will feel the 'confidence effects', said Mr Prior-Wandesforde.