By Emilyn Yap

SINGAPORE - Barely two weeks have passed since the central bank tightened monetary policy in Singapore, and already market watchers are flagging the possibility of a tougher stance ahead.

The trigger? A sharp 5.2 per cent year-on-year surge in headline inflation in March, up from February's 4.6 per cent, consumer price index (CPI) data released yesterday showed.

On a month-on-month basis, headline inflation rose 0.8 per cent, reversing from a 0.3 per cent drop in February.

Core inflation, which excludes accommodation and private transport costs, rose 2.9 per cent from the previous year, down slightly from February's 3 per cent.

"Singapore is in danger of losing its low-inflation status," said Credit Suisse economist Robert Prior- Wandesforde in a note. Inflation could climb higher in the short term and "it is by no means impossible that the headline rate hits 6 per cent in April", he added.

The strength of the latest CPI numbers helped explain why the Monetary Authority of Singapore (MAS) announced a tighter monetary policy on April 13, surprising most pundits who had expected no change in its stance.

March's headline inflation of 5.2 per cent was considerably above the median forecast of 4.7 per cent from a Bloomberg poll of 18 economists. It also displayed the strongest year- on-year pick-up since last June, said OCBC economist Selena Ling.

A jump in vehicle Certificate of Entitlement (COE) premiums in February was the main culprit. "The average COE premium for cars rose nearly $8,000 in February, and the premiums tend to enter the CPI with a one-month lag," said Barclays Capital economist Leong Wai Ho. As a result, private road transport prices rose 9.6 per cent in March from the previous year, far surpassing February's 4.3 per cent.

"Private road transport cost added 1.3 percentage points to CPI-All Items inflation in March, slightly more than twice its contribution in February," said MAS and the Ministry of Trade and Industry (MTI) in a joint release.

Accommodation cost rose 9.8 per cent from a year ago, below February's 10.2 per cent, while food inflation was broadly stable at 2.7 per cent.

CPI less imputed rentals on owner-occupied accommodation gained 4.1 per cent from a year ago, above February's 3.3 per cent.

Rising COE premiums have led several economists to warn of elevated headline inflation in the next few months. Premiums for cars above 1,600cc reached $91,000 in a recent round of bidding.