(Bloomberg) -- Consumer prices in Singapore rose more than forecast to an eight-year high last month, increasing expectations the city-state’s central bank will tighten policy in April and prompting the government to review its inflation forecasts.

The consumer price index in December accelerated to its highest level since Feb. 2013, driven by spikes in private transport, energy and food costs, according to a joint statement Monday from the Monetary Authority of Singapore and the Ministry of Trade and Industry. 

Details: Singapore December Consumer Prices +4% Y/y; Est. +3.7%

“There is no doubt now that the MAS will tighten at their April review. The only question is how aggressive they will go,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. in Singapore.

Headline inflation jumped by 4% from a year ago, exceeding a median forecast of 3.7% and beating expectations for a fourth month in a row. 

The MAS’s preferred core inflation measure, which excludes private transport and accommodation, rose by 2.1%, up from 1.6% in November, mainly driven by increases in airfares. 

The Singapore dollar traded up 0.1% to 1.3432 per dollar as of 1:56 p.m. local time.

Economists increasingly expect Singapore’s central bank will act in its April policy meeting to rein in price increases, with most forecasting a tightening of the city-state’s monetary policy. Meanwhile, the government has indicated its resolve to hike taxes to make up for two-years of pandemic-spending, despite the risks of further driving up prices.

“There remains significant uncertainty surrounding the outlook for inflation in the near term, including from the costs of air travel and commodity prices such as for food and oil,” the MAS and MTI said.

Under Review

“Given the recent stronger-than-projected inflation out-turns, including the sharp uptick in airfares, MAS and MTI are reviewing the current forecast ranges for CPI-All Items inflation and MAS Core Inflation in 2022,” they added.

Headline CPI rose 2.3% for the whole of last year, while core inflation rose 0.9%, both in-line with the MAS’s forecasts. The central bank previously saw headline inflation rising 1.5% to 2.5% in 2022, while core inflation was predicted to average at 1% to 2%.

“As the domestic Covid-19 situation stabilizes, consumer demand should strengthen, with the possibility of a greater pass-through of accumulating business costs to consumer prices,” said the MAS and MTI.

“The April tightening is already baked into market expectations,” said Selena Ling, head of Treasury Research & Strategy at Oversea-Chinese Banking Corp. in Singapore. “So it’s more a question if the upside CPI surprise will heighten speculation of faster or more aggressive tightening.”

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