© Reuters. View of the skyline in Singapore January 27, 2023. REUTERS/Caroline Chia/File Photo

SINGAPORE (Reuters) -Singapore’s February core inflation accelerated to its fastest pace in seven months, official data showed on Monday, as seasonal effects from the Lunar New Year drove services and food prices higher.

The core inflation rate, which excludes private road transport and accommodation costs, came in 3.6% in February from a year earlier, faster than the 3.4% forecast by a Reuters poll of economists and the 3.1% seen in January.

The February figure was the highest since the 3.8% in July 2023 according to LSEG data.

Headline consumer prices in February were up 3.4% from the same month last year, stronger than the 3.3% forecast in the poll and the 2.9% rise in January.

“This was driven by higher services and food inflation, partly reflecting seasonal effects associated with the Chinese New Year,” the Trade Ministry and Monetary Authority of Singapore (MAS) said in a statement on Monday.

Core inflation is expected to resume a gradual moderating trend over the rest of the year, it said, as import cost pressures continue to decline and tightness in the domestic labour market eases.

They projected both headline and core inflation to average 2.5% to 3.5% for 2024, unchanged from previous official forecast.

“Going forward, we expect inflation to remain elevated in March before easing to 2% by the end of the year,” Goldman strategists Rina Jio and Jonathan Sequeira wrote in a research note on Monday.

“We continue to expect the MAS to keep its monetary policy parameters unchanged this year,” they added.

While inflation has slowed from its peak of 5.5% in January last year, it remains sticky amid slowing economic growth and an increase in goods and service tax by one-percentage point this year.

The economy expanded 1.1% last year, moderating from the 3.8% in 2022.

Singapore expects higher economic growth at 1% to 3% this year but warned of a mixed economic outlook due to geopolitical risks. MAS in January left monetary policy settings unchanged in its first review of 2024.

MAS, which uses exchange rate as its primary tool, has increased the frequency of its reviews from twice a year to quarterly starting this year. It is due to revisit monetary settings in April.

“The gradually strengthening S$ trade-weighted exchange rate should also continue to temper Singapore’s imported inflation in the quarters ahead,” MAS and the Trade Ministry said.

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