By Reico Wong
INFLATION in Singapore stayed at a high 5 per cent last month, the same pace as in February, with higher prices for transport, housing and food contributing the most to the year-on-year increase.
On a month-on-month basis, the Singapore Department of Statistics (DOS) yesterday said that the consumer price index (CPI) last month increased marginally by 0.1 per cent, on a non-seasonally adjusted basis.
The figures were no surprise to analysts, who largely expect inflation for the entire Asian region not to change much in the next few months due to pressures from high food and fuel prices, coupled with tight capacity constraints.
"It was in line with expectations, and the month-on-month pace of increase is relatively moderate, so no one would get too upset, although it continues to stay around the multi-year high," said Mr
David Cohen, an economist at Action Economics in Singapore.
"I think the policymakers, like those elsewhere, are continuing to watch inflation nervously." The cost of transport last month surged by 13.4 per cent from a year ago, due to higher prices of cars and petrol.
Accommodation costs and electricity tariffs also shot up, pushing housing costs up by 7.1 per cent, while food prices increased by 2.6 per cent.
Meanwhile, DOS said that, compared to February, the more expensive housing, clothing and footwear, and "recreation and others" were offset partly by the 0.6 per cent drop in the cost of transport last month.
Overall, CPI in the first quarter of this year climbed by 5.2 per cent from the same period last year.
Mr Leif Eskesen, an economist at HSBC, said that there could be slightly softer readings on economic activity over the next few months, due to elevated oil prices and spillovers from last month's Japan earthquake. But these will not bring about enough slack in the economy.
"Capacity will remain tight... With the economy still operating at or above its potential, and demand conditions remaining strong, it is easier for businesses to pass on higher costs to consumers," he said.
"The additional tightening by the Monetary Authority of Singapore (MAS) earlier this month will also take time to filter through to economic activity, given the usual monetary policy lags."
Mr Eskesen also pointed out that MAS still has room to address further inflation and downside risks to growth, if necessary.
Economist Leong Wai Ho of Barclays Capital said that a greater sense of caution over the tail risks to growth and a desire to avoid excessive strength in the Singapore dollar were reflected in MAS' latest move.
The bank has forecast that the Singapore dollar will appreciate to 1.21 against the US dollar in a year. The local currency has been the best performer in Asia, excluding Japan.
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