SINGAPORE

This was in line with economists’ average forecast and meant that the CPI for the first quarter rose 5.2 per cent from the corresponding period last year.

But there is likely to be good news ahead, according to economists, who say that prices may have seen their peak in the first quarter.

They say policy action by the Monetary Authority of Singapore to allow the local currency to strengthen against major currencies last year and again earlier this month will help curb inflationary pressures.

The Singapore dollar yesterday hit a record high of S$1.2317 against the US dollar, which will temper the rise in the price of imports.

Underlying the 5-per-cent CPI rise in March were higher transport costs owing to costlier Certificate of Entitlement premiums and fuel, higher housing costs due to rising accommodation and electricity rates, and dearer food, resulting from higher commodity prices globally.

Still, economists say the CPI will be more moderate for the full year, with headline inflation coming in at the upper end of the Government’s 3- to 4-per-cent forecast.

CIMB economist Song Seng Wun, who estimates 2011 inflation at 3.8 per cent, said:

“Utilities bills are likely to go up in the second quarter after they were brought down by Government rebates in the first.

“Transport costs remain high but inflation will ease because of a combination of tightening by the MAS and higher base of comparison.”

[#mIsleadIng cOmparIsOn ? ? ? ?  The Only Based Year shOUld be Used #]

He added: “Although COE prices are higher than what they were a year ago, they are not increasing at the same rate as the previous year, so it looks like in terms of the year-on-year side, transport costs will continue to be the primary contributor to the headline CPI.

“But, going forward, its effect will become less pronounced, especially in the second half.”

Action Economics director David Cohen expects a higher rate of inflation.

“We’re looking for something around 4 to 4.5 per cent. That’s slightly above what the Government is saying but, like the Government, we expect that it would moderate a bit in the second half of the year. The base effect will be helpful.”

On a month-on-month basis, inflation ticked up a modest 0.1 per cent, led by the cost of housing, clothing and footwear and recreation.

The number, though, was capped by transport prices, which fell 0.6 per cent.

There is a dark cloud, though.

Economists warn that oil prices — which have advanced 23 per cent this year amid tensions in the Middle East and North Africa — could continue to rise and add more pressure.

CIMB estimates that for every US$10 increase in the price of a barrel of oil, headline inflation in Singapore will rise 0.2 to 0.3 per cent.