Singapore should let its inflation rate rise temporarily to accommodate price gains from tighter labour markets even as those stemming from credit growth should be "forcefully tackled," the International Monetary Fund (IMF) said on Monday.

"Inflation is expected to remain under pressure from the tight labour market and lagged effects of higher prices for vehicle permits and real estate," the IMF said.

The Monetary Authority of Singapore estimated last month consumer price gains will average 4 to 4.5 per cent this year, compared with the 3.5 to 4.5 per cent range it forecast previously. The inflation rate was 4 per cent in July, after holding at 5 per cent or more in the previous four months.

The IMF also forecast Singapore's economy to grow by 2.9 per cent this year, before accelerating to 3.4 per cent next year. The IMF forecast is better than the Singapore Government's prediction earlier this month of 1.5 to 2.5 per cent growth this year, down from an earlier projection of as much as 3 per cent.

TODAY