Singapore inflation hits 16-year high

Singapore's inflation accelerated last month at the fastest pace since 1982, increasing pressure on the central bank to allow its currency to appreciate further to ease rising import prices.

The consumer price index jumped 6.6 percent from a year earlier, after gaining 4.4 percent in December, the Department of Statistics said yesterday. Prices rose 1.3 percent from December.

The Monetary Authority of Singapore this month increased its forecast for inflation this year, predicting consumer prices will gain at more than double last year's pace. The central bank has allowed the currency to climb to the strongest in 11 years amid government warnings there is a limit to the Singapore dollar's appreciation because it reduces competitiveness.

"The potential for a stronger currency is still there because the risk of inflation staying high is increasing," said Song Seng Wun, an economist at CIMB-GK Research in Singapore.

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

"The latest inflation forecast has taken into account the expected increase in year-on-year inflation in the first half of the year," the government said in a statement yesterday. "In the second half of 2008, year-on-year inflation is expected to moderate significantly."

Electricity tariffs have climbed for three consecutive quarters, while rising prices of daily food essentials prompted Singaporean Prime Minister Lee Hsien Loong (李顯龍) this month to encourage consumers to buy frozen meat and in-house brands of supermarket products that are usually cheaper.

Food prices, which make up 23 percent of the index, rose 5.8 percent last year from a year ago, after December's 5.5 percent increase.

The Singapore dollar has gained 2.3 percent this year, climbing to the highest since 1997. The central bank, which has sought a "gradual and modest" strengthening in the currency since April 2004, said in October it would allow a "slightly" faster appreciation in the Singapore dollar.