Singapore inflation probably climbed to 25-year high

February 23, 2008
Singapore Democrats

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Shamim Adam
Bloomberg
22 Feb 08

Singapore’s inflation probably accelerated in January to the highest since 1982, adding pressure on the central bank to curb price gains even as the economy weakens.

The consumer price index jumped 5.6 percent from a year ago, after gaining 4.4 percent in December, according to the median estimate of 16 economists surveyed by Bloomberg. The Department of Statistics will release the report at 1 p.m. on Feb. 25.

The Monetary Authority of Singapore last week increased its forecast for inflation this year, predicting consumer prices will gain at more than double the 2007 pace. Rising prices may increase pressure on the central bank to allow faster gains in the currency in its next review in April, economists said.

“It’s a difficult time for the central bank,” said Tetsuo Yoshikoshi, an analyst at Sumitomo Mitsui Banking Corp. in Singapore. “It cannot tolerate an excessively strong Singapore dollar but at the same time the central bank needs to bring down inflation from these high levels.”

Prices probably rose last month as the government raised property valuations for public housing, the island’s biggest power company increased electricity tariffs and the advent of Chinese New Year, celebrated by the majority of Singaporeans, boosted food costs.

Currency factor

Finance Minister Tharman Shanmugaratnam last week said Singapore will use its currency and diversify its sources of food supply to curb inflation. Still, the government warned there is a limit to the Singapore dollar’s appreciation because it reduces the island’s competitiveness.

The currency has climbed 2.1 percent against the U.S. dollar this year, adding to a gain of 6.7 percent last year. It reached the highest in 11 years today, gaining 0.2 percent to S$1.4074 against its U.S. counterpart.

Singapore’s central bank expects inflation to average between 4.5 percent and 5.5 percent in 2008, after gaining 2.1 percent last year.

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Singapore CPI forecast
Forecasts for January consumer price gains from the same month the year before:

 

CPI

Firm

YoY%

Media

5.6%

Average

5.7%

High

6.8%

Low

4.5%

Number of Estimates

16

Action Economics

6.0%

Barclays Capital

5.7%

CIMB-GK Research

5.6%

Citi

6.5%

DBS Bank

6.6%

Forecast Ltd.

5.5%

Fortis Bank

5.5%

HSBC Singapore

6.0%

ING Groep NV

5.8%

JPMorgan Chase

5.4%

OCBC Bank

4.5%

Sumitomo Mitsui Banking

5.5%

Standard Chartered

5.5%

Thomson IFR

4.8%

UBS

4.8%

UOB Group

6.8%