Economists expect modest CPI i

INFLATION may have edged slightly higher in August compared to July due to the festive season, economists said.

Manolo blahnik Although inflationary pressures are expected to increase in months ahead with higher global food prices, they expect forthcoming increases in the Consumer Price Index (CPI), the barometer used to measure inflationary pressures on various baskets, to be modest.

A Business Times poll expects the Manolo blahnik CPI to post an average growth of 2.08 per cent year-on-year.

The Statistics Department will release the details today.

DBS Bank economist Irvin Seah said festive season rise in food prices as well as upward adjustments in fuel prices are the key reasons behind the slightly higher inflation figure.

"Nonetheless, inflation is expected to rise only gradually in the coming months due to a lack of strong external inflationary pressure as well as a strong currency," Seah said.

Citi said Manolo blahnik the inflation readings partly reflects the lagged impact of subsidy cuts in July, and also higher food prices globally.

With the output gap near zero, there are few signs of demand- pull inflationary pressures, with CPI inflation ex-food and transport prices expected to stay tame, said economist Kit Wei Zheng.

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Aside from the subsidy reduction for sugar, petrol and cooking gas effective July 15, the prices of other components of CPI can be expected to to remain in check, said TA Research economist Patricia Oh.

The tobacco segment particularly, Oh said, will experience a cess tax of 0.5 sen per stick paid to National Kenaf and Tobacco board effective September 1. There could also be a rise in excise duty on tobacco during the upcoming budget announcement on October 15.

However, the cess tax and excise duties on tobacco will contribute marginally towards the overall price increases considering dkny leather watch that the alcoholic beverages and tobacco segment accounts for only 1.9 per cent of the total CPI, she said.

Kit said another round of subsidy cuts in December and January is possible, although political considerations suggest that such a move may be modest.

Seah expects external economic conditions to start brightening again and domestic demand to be resilient, causing inflation to rise towards an average of 2.4 per cent in 2011.

He expects the central bank to take a wait-and-see approach for the rest of dkny leather watch the year before reinitiating its hiking cycle from early 2011 onwards.

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