SINGAPORE'S annual consumer price inflation last month climbed to over a 25-year high on Wednesday.

But a slowing economy may restrain the Monetary Authority of Singapore (MAS) from further monetary policy tightening to tame prices.

Prices rose a seasonally adjusted 0.5 per cent from November, in line with expectations, and from a year earlier climbed 4.4 per cent in the biggest jump since April 1982 on higher food and transport costs, the Department of Statistics said.

"But the growth outlook has deteriorated so significantly that the central bank might have to tolerate inflation for the time being," he added.

The MAS conducts monetary policy through the Singapore dollar because the country's economic growth is heavily dependent on exports and inflation is mostly imported.

The US Federal Reserve slashed a key interest rate by 75 basis points on Tuesday, its biggest rate cut in more than 23 years, in an emergency move to avoid a recession.

But with investors betting on more US interest rate cuts this year, analysts said interest rates in Singapore are set to fall too, fuelling inflation.

Property prices, for instance, have surged since mid-2006, taking prices to a 10-year high but below peaks seen before the Asian financial crisis.

"The risk of inflation is definitely on the upside," said Ms Prakriti Sofat, a HSBC economist.

"We expect inflation to peak around 5 per cent in 2008," she said.

Central banks across the world from China to India to the United States are fighting rising inflation as higher oil and commodity prices push up consumer prices. - REUTERS

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