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SINGAPORE (Reuters) - Singapore's inflation rose at its fastest pace in two years in January, led by services and oil-related items, virtually shutting out the prospect of further monetary policy easing at the central bank's next meeting in April.
The all-items consumer price (CPI) in January rose 0.6 percent from a year earlier, official data showed on Thursday, the fastest growth since September 2014.
The momentum in consumer prices, combined with stronger-than-expected economic growth at the end of 2016 and the government's generous budget for the coming year will take near-term monetary policy easing off the table, analysts said.
"Given that budget 2017 was expansionary and growth and inflation are actually evolving in line with MAS (Monetary Authority of Singapore) expectations, I think this reduces the odds of any shift in...policy at the April meeting," said Weiwen Ng, and economist for ANZ.
Ng said the rise in CPI reflects higher transport costs and can be partly attributed to a low base of comparison from a year ago.
ANZ still sees a risk of further policy easing although the possibility of such a move at the next meeting in April is now lower, Ng said.
The central bank last eased its exchange rate-based policy in April 2016.
Singapore posted its fastest growth in more than six years in the fourth quarter, expanding at an annualised 12.3 percent from the previous three months.
But risks from rising protectionism in the United States and a still-soft services sector point to an underpowered economy that may be in need of more stimulus.
Headline CPI had been dragged down over the past two years by lower global oil prices, only rising for the first time in two years in December 2016.
Looming water price hikes and plans for a carbon tax could further stoke inflation.
The MAS core inflation measure in January rose 1.5 percent from a year earlier, the fastest rise since December 2014. In December it rose 1.2 percent.
The MAS and Ministry of Trade and Industry kept their 2017 forecasts for both headline CPI and core CPI. Imported inflation is likely to rise on the back of a higher global oil prices while domestic inflation should be muted due to a subdued labour market, they said in a joint statement.
The central bank has said that core CPI is the most relevant indicator for monetary policy. The MAS core inflation measure excludes changes in the price of cars and accommodation, which are influenced more by government policies.
Reporting by Fathin Ungku; Additional reporting by Masayuki Kitano; Editing by Shri Navaratnam