Singapore’s inflation held near the fastest pace since January 2009 as the government predicts prices will climb further amid rising food and labor costs.

The consumer price index gained 3.5% in October from a year earlier, after gaining 3.7% in September, Singapore’s Department of Statistics said in a statement today. That compared with the 3.7% median estimate of 12 economists surveyed by Bloomberg News. Prices rose 0.5% from September, without adjusting for seasonal factors.

Singapore’s economic expansion this year has fuelled inflation and prompted the central bank to allow faster currency gains even as neighbours Malaysia and Thailand refrained from tightening policy this quarter. The Monetary Authority of Singapore uses the currency instead of interest rates to manage inflation, which it forecasts may quicken to about 4% by the end of 2010 and “stay high” in the first half of 2011.

“With our view that food inflation could accelerate further next year, risks to headline CPI are to the upside despite the pre-emptive tightening by the MAS earlier,” Euben Paracuelles, a Singapore-based economist at Nomura Holdings Inc., said before the report. “We are forecasting average inflation next year at 2.8%, at the high end of the MAS’s comfort range.”

World food prices climbed to the highest level in more than two years in October as costs rose for meat, dairy products, cereals, cooking oil and sugar, according to the United Nations’ Food and Agriculture Organization.