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Singapore inflation steady at 0.6% in July; core inflation highest in four years

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Food inflation came in at 1.5 per cent in July, unchanged from June. Services inflation was lower at 1.5 per cent, compared to 1.7 per cent the month before.

SINGAPORE'S headline inflation was steady in July with the consumer price index (CPI) up 0.6 per cent year-on-year, in line with economists' expectations and unchanged from June, according to a Department of Statistics report on Thursday.

Core inflation, which strips out the cost of accommodation and private road transport, rose 1.9 per cent year-on-year due to a larger increase in the cost of electricity and gas - up from June's 1.7 per cent rise and the fastest pace since August 2014, when it climbed 2 per cent.

Despite the rise in core inflation, headline inflation was unchanged due to a decline in private road transport costs.

The cost of electricity and gas rose 12.7 per cent in July, steeper than the 3.7 per cent rise in June, reflecting an upward revision in electricity tariffs after global oil price increases in the preceding quarter.

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Food inflation came in at 1.5 per cent in July, unchanged from June. Services inflation was lower at 1.5 per cent, compared to 1.7 per cent the month before, due to smaller increases in the cost of education, healthcare services, airfares and domestic services fees.

Both accommodation and private road transport saw costs fall. Accommodation cost slid 3 per cent in July, the same rate of decline as in June. Private road transport costs fell 0.2 per cent in July, reversing June's 0.4 per cent increase, due to a steeper year-ago fall in car prices and a decline in Certificate of Entitlement premiums.

Imported inflation is likely to rise mildly on the back of rises in global oil prices and food commodity prices, said the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) on Thursday. Domestic sources of inflation are also expected to rise, alongside faster wage growth and a pick-up in domestic demand. However, the extent of consumer price increases will stay moderate, as retail rents remain relatively subdued and firms' pricing power may be constrained by competition, said MAS and MTI.

Core inflation is expected to rise gradually over the course of 2018, with the full-year figure averaging in the upper half of the 1 to 2 per cent forecast range. Headline inflation is similarly projected to come in within the upper half of its zero to 1 per cent full-year forecast range. Accommodation costs are expected to fall by a smaller extent than in 2017, while private road transport inflation should decline in 2018 as inflationary effects from previous measures dissipate.