Singapore could face more inflationary pressure due to higher global commodity prices and transport costs with annual inflation hitting as high as 4% in the fourth quarter, the central bank said on Wednesday.

The Monetary Authority of Singapore’s latest decision to tighten policy is “appropriate and timely” given the strong economic recovery and improving global environment, it said in its twice-yearly macroeconomic report. 

 

The central bank did not directly comment on the economic troubles of Greece, but said “confidence is faltering in the Eurozone given concerns over sovereign debt and fiscal sustainability.” 

 

The central bank on April 14 moved the currency band up and switched to a policy of its modest and gradual appreciation. (SGD=D3) (SGD=), its most aggressive tightening move ever. 

 

At the review, it also lifted its inflation forecast by 0.5 percentage point to between 2.5 and 3.5% for 2010, and its 2010 GDP forecast by 2.5 percentage points to 7-9% 

 

Despite the expected pick up in inflation later in the year, it said on Wednesday it would stick with its full-year forecast. 

 

The policy decision came as the economy expanded a much more-than-expected 32.1% on a seasonally adjusted annualised basis in the first quarter, the highest since records began in 1975.