S'pore Dec annual inflation surges over 25-yr high

Singapore's December consumer prices rose a seasonally adjusted 0.5 per cent from November, taking annual inflation in the republic to over a 25-year high on rising food and transport costs.

From a year earlier, prices rose 4.4 per cent from the 25-year high figure of 4.2 per cent hit in November, the Department of Statistics said in a statement on Wednesday.

The monthly rise was in line with economists expectations and took 2007 inflation up 2.1 per cent from the previous year.

Economists expect Singapore to maintain its policy of a gradual and modest appreciation of the Singapore dollar to tame inflation.

Most analysts expect inflation in Singapore to climb in the coming months to a near three-decade high of 5 per cent as surging costs for housing, transport, food and electricity tariffs push up consumer prices.

'The risk of inflation is definitely on the upside,' said Prakriti Sofat, a HSBC economist. 'We expect inflation to peak around 5 per cent in 2008.'

Ms Sofat said she expected the central bank to allow a rising Singapore dollar to keep inflation in check. The Singapore dollar rose to 1.4373 against the US dollar by 0534 GMT, compared to 1.4395 before the data came out at 0500 GMT.

'The economic numbers from Singapore have been quite disappointing, but it is difficult for the central bank to ignore the fact that inflation is near 6 per cent in a country that is used to 1.5-2 per cent of inflation,' she said.

The Singapore central bank conducts monetary policy through the Singapore dollar instead of interest rates because the country's economic growth is heavily dependent on exports.

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

A sub-index for housing costs was up 2.9 per cent in December from a year ago while food prices, which carry the largest weighting in the index, rose 5.5 per cent.

The statement does not include seasonally adjusted figures for the sub-indices.