Financial services group Credit Suisse believes that inflation in Singapore for May and June may hit 8.5 per cent, but it says things will look brighter in the second half of the year.
Inflation in Singapore was hovering at 25-year highs in March and April, largely due to rising energy costs. In April, energy costs added 1.6 per cent to the overall consumer price index (CPI).
While many analysts expect inflation to be between 7.5 and 8 per cent, Credit Suisse is more pessimistic. It feels that the impact of crude price increases has not yet been fully factored in.
Credit Suisse is basing its assumptions on oil prices at US$130 a barrel.
As for food, the good news is that prices in global markets are starting to moderate.
But analysts say that even though global food prices have somewhat stabilised, Singapore is still going to see some food price increases in the near future because previous price hikes have yet to make their way through the system.
The broad view among analysts is that inflation will come down by the end of the year. Credit Suisse thinks that the inflation rate will be around 5 per cent while others are more bullish with their forecast ranging from 2.5 to 3.5 per cent.
Analysts say the picture will look brighter in 2009 when the base effect from increases in housing prices wears off.
The government's forecast for inflation this year is 5 to 6 per cent. - CNA/ac
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