Singapore's Consumer Prices Climb 5%, Justifying Tighter Monetary Policy

Singapore’s inflation held at 5 percent in March as housing and transportation costs surged, supporting the central bank’s decision this month to allow further currency appreciation.

The increase in the consumer price index matched the gain reported previously for February and the median estimate of 13 economists surveyed by Bloomberg News, a Department of Statistics statement showed today. Prices rose 0.1 percent from February, without adjusting for seasonal factors.

Asian central banks from China to Thailand and India are raising interest rates or allowing their currencies to gain to curb price pressures as oil and food costs rise. Singapore’s dollar has risen to records after the central bank said April 14 it would allow further appreciation in its third tightening of monetary policy in a year.

“Food inflation is rising despite a strong Singapore dollar while oil prices have continued to escalate despite the gradual stabilization in the Middle East and North Africa political crisis,” Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore, said before the report. The “chance is high that inflation will remain stuck at an uncomfortably high range of 4.5 to 5.5 percent in the coming months before easing off in the second half of the year,” he said.

The Monetary Authority of Singapore, which uses the exchange rate as its main tool to manage inflation, said this month it will re-center the currency’s band upwards, a move economists including Seah said amounts to a one-off revaluation. Inflation may reach the upper end of the central bank’s 3 percent-to-4 percent forecast range this year, it said.

The Singapore dollar has gained more than 11 percent against the U.S. currency in the past year to be the best performer in Asia excluding Japan. It traded at S$1.2345 a dollar at 12:42 p.m. local time.

Consumer prices may rise faster in the coming months after Singapore Power Ltd., the island’s main electricity provider, increased tariffs for the April-to-June quarter by an average 6.5 percent because of higher oil costs.

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

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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