Sept. 25 (Bloomberg) -- Singapore's inflation rate fell to an 11-month low in August as a stronger currency made fuel and other imports less expensive.

The consumer price index rose 0.7 percent from a year earlier after gaining 1.1 percent in July, the Department of Statistics said in a statement today. That was less than the median 0.9 percent forecast in a Bloomberg News survey of 13 economists. From July, consumer prices were unchanged.

The Singapore dollar's 5 percent gain against its U.S. counterpart this year, the fifth-best performing of 15 Asia- Pacific currencies tracked by Bloomberg, is helping cut the cost of oil and other imports. That may prompt the city-state's central bank next month to extend its 2 1/2-year policy of allowing a ``gradual and modest'' appreciation in the currency.

``We are seeing less upside in fuel and utility costs,'' said Song Seng Wun, an economist at CIMB-GK Research in Singapore. ``The currency policy effectively keeps imported inflation minimal.''

The Singapore dollar was S$1.583 against the U.S. currency today, little changed from S$1.5838 at the end of last week.

The Monetary Authority of Singapore forecasts inflation of between 1 percent and 2 percent in 2006, higher than last year's 0.5 percent. Consumer prices will rise between 1 percent and 2 percent next year, it said last month.

The nation's inflation rate is expected to average 1.4 percent this year, according to the median forecast of 19 economists in a central bank survey released Sept. 7, declining from a June estimate of 1.5 percent. For the first eight months of 2006, consumer prices rose 1.2 percent compared with the same period last year, today's report said.

Oil Prices

Crude oil prices are about 8.9 percent lower than a year ago. It was $59.98 a barrel today, declining from a record $78.40 on July 14.

``The decline in the underlying price of crude is bringing prices lower not just for Singapore but throughout the region as well,'' said Robert Prior-Wandesforde, an economist at HSBC Holdings Plc in Singapore. ``There is a good chance that inflation in Singapore could fall fairly close to zero by early next year.''

Food prices, which make up 23 percent of the index, rose 1.7 percent in August from a year earlier, following July's 1.9 percent gain. From July, food prices were unchanged.

Transport and communication costs, the second-biggest component at 22 percent of the index, declined 1.8 percent in August from a year earlier, following July's 0.6 percent drop. From July, transport and communication prices fell 0.1 percent.

Buses, Taxis

Transport costs may rise later this year as SMRT Corp. and SBS Transit Ltd., Singapore's biggest bus and train operators, raise fares by as much as 3 Singapore cents (1.9 U.S. cents) per ride starting Oct. 1. ComfortDelGro, which operates Singapore's largest fleet of buses and taxis, in July increased cab fares.

Gains in transportation costs may be tempered as authorities will sell 13 percent more vehicle permits between October and March than initially planned, the Singapore Land Transport Authority said Sept. 20.

Singapore controls pollution and congestion on its roads by selling a limited number of permits, known as a Certificate of Entitlement, every year for each category of vehicles.

Housing costs, the third-largest component of the index, rose 2.1 percent from a year earlier, after July's gain of 2.2 percent. From July, housing prices fell 0.1 percent.

Recreation costs, which include holiday travel, slid 0.2 percent in August from a year earlier and rose 0.2 percent from the previous month. Prices of clothing and footwear increased 2 percent from a year earlier and 1.8 percent from July.

Education and stationery prices climbed 1.5 percent from a year earlier and were unchanged from July. Health-care costs, which rose 0.8 percent from a year earlier, were also unchanged from July.

On a seasonally adjusted basis, consumer prices in August did not change from the month before, the report said.

To contact the reporter on this story: Shamim Adam in Singapore sadam2@bloomberg.net

Last Updated: September 25, 2006 02:04 EDT