Singapore's annual inflation slowed unexpectedly in February largely on account of lower contributions from food prices and services fees, a joint release from the Ministry of Trade and Industry and the Monetary Authority of Singapore showed Friday.
Inflation slowed for the third straight month to 4.6 percent from 4.8 percent a month ago. Economists had expected the annual rate to rise to 5 percent. The February's rate was the lowest since May 2011.
Food inflation moderated to 2.6 percent in February due to the seasonal fall in non-cooked food prices following the Chinese New Year. Moreover, services inflation eased slightly to 3 percent, partly mirroring the decrease in the cost of holiday travel.
On the other hand, a slightly sharper gain in car prices provided a partial offset to the lower contributions from food prices and services fees. Accommodation cost, which was up 10 percent, remained the single largest contributor to the annual inflation.
Month-on-month, consumer prices dipped 0.3 percent, after rising 0.9 percent in the preceding month.
Excluding costs of accommodation and private road transport, MAS core inflation slowed to 3 percent annually in February from 3.5 percent in January.
Nonetheless, both CPI and core inflation will remain elevated over the coming few months, at around 5 percent and 3 percent year-on-year, respectively before moderating gradually, the MAS and MTI said.
Currently, the 2012 forecasts for consumer price inflation and MAS core inflation remain at 2.5-3.5 percent and 1.5-2.0 percent respectively. These estimates are predicated on some moderation in domestic and external cost pressures in the second half of the year given the generally sluggish economic environment, the report said.
The forecasts will be reviewed if underlying price pressures turn out to be more persistent, it added.
In October, the Monetary Authority of Singapore loosened its policy stance amid weak growth outlook and expectations for a moderation in core inflation, by lowering the slope of the policy band, in turn allowing the Singapore dollar to appreciate at a slower pace.
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