THE rise in the consumer price index (CPI) hit 6.7 per cent in March from a year ago, with economists reckoning that the climb may still have a little way to go.
The CPI increase, a 26-year high, was largely driven by higher costs of food, housing, and transport and communication. Food prices rose 7.6 per cent compared to March 2007 as a result of costlier cooked food, rice and other cereals, milk products, fresh vegetables, seafood and poultry.
Higher accommodation costs and electricity tariffs caused housing cost to increase by 8.1 per cent year-on-year. Costs of transport and communication rose 7.9 per cent year-on-year from higher petrol prices, car prices and taxi fares.
For Q1 2008 as a whole, the CPI was 6.6 per cent higher compared to the year-ago quarter.
Against February though, the March CPI fell by 0.1 per cent.
Some economists noted that the CPI may inch up in the next few months. While 'we are getting close to the peak - inflation probably has a little further to rise yet - it could well hit 7 per cent in April', said HSBC economist Robert Prior-Wandesforde.
The pressure, however, is likely to ease in H2 2008. According to Mr Prior-Wandesforde, the impact of the Goods and Services Tax (GST) increase in July last year would have worn out by then.
In the same vein, Goldman Sachs economists Mark Tan and Michael Buchanan expected the CPI to peak at around 7 per cent in H1 2008. According to their report, the 6.7 per cent increase in the March CPI 'was just a touch below the consensus of 6.8 per cent year-on-year'.
The Ministry of Trade and Industry's forecast of CPI inflation for 2008 stands at 4.5-5.5 per cent. Mr Prior-Wandesforde, though, believed that the range may be breached. 'We are looking for a 6 per cent average,' he said.
He also pointed out that inflation is driven not just by supply-side factors, but by demand-side ones as well. In Singapore, 'domestic demand has been buoyant and is likely to remain so, given the country's extremely loose fiscal and monetary conditions', he said.
'Strong demand is not only pushing service sector inflation higher, but is also contributing to the strength in food and energy prices,' he added.
The Monetary Authority of Singapore had in April raised the policy trading band for the trade-weighted Singapore dollar, or S$NEER, to counter inflation.
'We estimate that the S$NEER has since moved close to the top of the new band,' says the Goldman Sachs report, and 'we still see further gains for the Singapore dollar, albeit at a more measured pace and increasingly subject to moves in the US dollar'.
The CPI increase, a 26-year high, was largely driven by higher costs of food, housing, and transport and communication. Food prices rose 7.6 per cent compared to March 2007 as a result of costlier cooked food, rice and other cereals, milk products, fresh vegetables, seafood and poultry.
Higher accommodation costs and electricity tariffs caused housing cost to increase by 8.1 per cent year-on-year. Costs of transport and communication rose 7.9 per cent year-on-year from higher petrol prices, car prices and taxi fares.
For Q1 2008 as a whole, the CPI was 6.6 per cent higher compared to the year-ago quarter.
Against February though, the March CPI fell by 0.1 per cent.
Some economists noted that the CPI may inch up in the next few months. While 'we are getting close to the peak - inflation probably has a little further to rise yet - it could well hit 7 per cent in April', said HSBC economist Robert Prior-Wandesforde.
The pressure, however, is likely to ease in H2 2008. According to Mr Prior-Wandesforde, the impact of the Goods and Services Tax (GST) increase in July last year would have worn out by then.
In the same vein, Goldman Sachs economists Mark Tan and Michael Buchanan expected the CPI to peak at around 7 per cent in H1 2008. According to their report, the 6.7 per cent increase in the March CPI 'was just a touch below the consensus of 6.8 per cent year-on-year'.
The Ministry of Trade and Industry's forecast of CPI inflation for 2008 stands at 4.5-5.5 per cent. Mr Prior-Wandesforde, though, believed that the range may be breached. 'We are looking for a 6 per cent average,' he said.
He also pointed out that inflation is driven not just by supply-side factors, but by demand-side ones as well. In Singapore, 'domestic demand has been buoyant and is likely to remain so, given the country's extremely loose fiscal and monetary conditions', he said.
'Strong demand is not only pushing service sector inflation higher, but is also contributing to the strength in food and energy prices,' he added.
The Monetary Authority of Singapore had in April raised the policy trading band for the trade-weighted Singapore dollar, or S$NEER, to counter inflation.
'We estimate that the S$NEER has since moved close to the top of the new band,' says the Goldman Sachs report, and 'we still see further gains for the Singapore dollar, albeit at a more measured pace and increasingly subject to moves in the US dollar'.
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