Singapore's central bank confirmed an apparent off-the-cuff remark by Trade and Industry Minister Lim Hng Kiang in parliament that inflation would come in at 1-2 percent this year, above the government's previous forecast of 0.5-1.5 percent.

"I would say we have been enjoying practically 16 quarters of growth. In fact, I am surprised our inflation numbers are as low as they are," Lim told parliament on Monday.

The government earlier this month raised its 2007 growth target to 7-8 percent from 5-7 percent, and some economists said that was conservative after a construction and banking boom led to growth at an annualised 14.4 percent in the second quarter.

While prices have been rising in some segments of the $138 billion economy, particularly the private property market, overall inflation has remained relatively contained.

In July, the consumer price index rose a higher-than-expected seasonally adjusted 1.5 percent from June, reflecting a tax hike, surging property prices and rising labour costs.

Economists said the inflation upgrade appeared to be in line with market expectations after the CPI number last month.

"It's a reasonable revision based on the bigger-than-expected jump in July," said David Cohen at Action Economics. "I don't think there's any need to change monetary policy parameters as the jump in the consumer price index was primarily attributable to the tax hike."

The MAS, which does not set interest rates like most other central banks, said on Monday that it would continue to allow a modest and gradual rise in the Singapore dollar -- its main monetary policy tool -- to temper import costs.

Lim also told parliament that although the inflationary impact caused by a rise in sales tax to 7 percent from 5 percent from July 1 would be short-lived, prices would grow faster in the second half of the year than in the first six months.

"The government will continue to keep a tight watch on business costs," he said.

A spokeswoman for the Monetary Authority of Singapore declined to comment on the central bank's previous 2008 forecast that said inflation could reach 2 percent next year, a view last confirmed at the MAS' annual news conference on July 25.

The central bank is likely to give an update on its forecast at its next scheduled monetary policy review in October.

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