Inflation in Hong Kong rose 3.7 percent in November from a year earlier, down marginally from 3.8 percent in the previous month, as private housing rental hikes slowed down despite food price increases at a faster pace during the month, the Census and Statistics Department said on its website on Thursday.

November's CPI rise was lower than the median 3.8 percent rise forecast by 10 economists surveyed by Bloomberg News earlier. The underlying CPI that nets out the effects of all government's one-off relief measures expanded 3.8 percent last month, unchanged from October, according to the government.

A government spokesman said that headline inflation receded slightly and underlying inflation held stable in November as private housing rentals saw a narrower year-on-year increase while the basic foodstuffs' prices picked up somewhat in November.

Food and private housing rentals expanded 4.2 percent and 5.0 percent in November year-on-year, respectively, government figures showed on Thursday.

The spokesman indicated that inflation should remain contained in the near term because of muted local economic growth and a moderation in imported inflation.

"However, the volatility of international food and commodity prices amid the global liquidity glut, as well as the pick-up in local housing rentals since the early part of 2012, may pose some upside risks to inflation further down the road," the spokesman added.

On Nov 16, the Hong Kong government lifted its headline and underlying CPI forecasts for the year to 3.9 percent and 4.5 percent, respectively, from estimates of 3.7 percent and 4.3 percent made in August, citing global food prices hike, inflow of hot money, and the renewed pick-up in local residential rentals as reasons for the price hikes.

Indicating that the slow-growing economy will continue to restrain inflationary pressure in the near term, the Hong Kong Monetary Authority (HKMA) said that pressure from the rental component is likely to increase further amid the gradual pass-through of rising property prices and rentals for fresh leases.

"Risks to inflation have also increased with additional quantitative easing in the US, through its potential impact on global commodity prices and local property prices," HKMA said in a report released on Wednesday.

A Hong Kong Economic Monitor released by Hang Seng Bank this month also indicated that renewed capital inflows and further asset market rallies are posing upside risk to the inflation outlook for the year ahead.

"We believe inflation is likely to be higher by mid-2013 than it is now in the territory," Ryan Lam and Joanne Yim from the bank wrote in the report. They believe that inflation has bottomed out and is heading higher in the city.

Several factors including rebound in the mainland's grain prices, the renewed strength of the yuan against the Hong Kong dollar, the unfavorable base effect, the rising rental rates following the fresh round of the property-cooling measures will drive inflation to rebound gradually throughout next year to reach 5 percent by year end and record an average 4.3 percent for 2013, according to Hang Seng Bank.

litao@chinadailyhk.com

(HK Edition 12/21/2012 page2)