Singapore's annual inflation accelerated as expected in June, mainly due to a pick up in petrol pump prices. But, the central bank reduced its inflation estimate for this year citing sharper-than-expected decline in car prices.
According to a combined statement from the Ministry of Trade and Industry and the Monetary Authority of Singapore released on Tuesday, consumer price inflation rose to 1.8 percent from 1.6 percent in May.
Inflation increased for the second consecutive month and came in line with expectations.
Petrol pump prices increased after three consecutive months of price correction and services inflation climbed to 2.7 percent from 2.5 percent.
At the same time, food inflation remained at 2 percent. Accommodation cost inflation was 4.8 percent in June, down from 5.1 percent in May. Meanwhile, private road transport cost fell by a more moderate 2.1 percent in June.
As a result of the sharper-than-expected decline in car prices, the central bank trimmed its inflation forecast for 2013 to 2 percent-3 percent from 3 percent-4 percent previously.
Although imputed rentals on owner-occupied accommodation will continue to add considerably to consumer price inflation, the pace of increase will likely be slower in the second half as more housing units come on-stream, the bank reckoned.
However, car prices are significantly lower following the introduction of the various motor vehicle-related policy measures.
On a monthly basis, consumer prices gained 0.2 percent, following a 0.4 percent rise a month ago. Core inflation was flat compared to 0.2 percent in the previous month.
Imported inflation will remain subdued this year, MAS said, but domestic cost pressures are expected to persist amid continuing tightness in the labor market.
As such, MAS core inflation, which excludes the costs of accommodation and private road transport, stayed at 1.7 percent in June. Core inflation is expected to rise moderately in the second half of the year and average 1.5 percent-2.5 percent in 2013.
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