Hong Kong’s underlying inflation rate increased 6.4 percent in October, the same as in September, still driven by private housing rents and food, the government said on Tuesday, which expects inflation to peak in the last quarter of this year.

Overall CPI rose 5.8 percent in October from a year earlier, also the same as September, said the Census and Statistics Department on Tuesday. That compared with a median estimate of 5.7 percent in a survey of eight economists by Bloomberg News.

“The underlying inflation rate held stable in October after its uninterrupted rise over the past year or so, not withstanding the enlarged increase in private housing rents and the still-elevated inflation,” said a government spokesperson.

The spokesperson added that inflation is likely to reach its peak in the fourth quarter as price pressures on both the external and domestic fronts are set to ease, with global food and commodity prices ebbing in recent months and the local economy slowing down. However, with the lagging effects of the earlier surge in market rents still feeding through, inflation could remain rather notable in the near term, the spokesperson warned.

Lu Jiang, economist at JPMorgan, said that she believes headline inflation numbers will gradually come down, although it could be sticky like October’s figures in the next couple of months. Given the lagging effects of the rental market, housing CPI will continue to rise, but at a slower pace, Jiang added.

According to government figures, the prices of alcoholic drinks and tobacco increased 19.9 percent in October, due to the imposition of the tobacco duty. Private housing rents went up 9.4 percent and food prices gained 8.1 percent.

Average private rental prices in the city were recorded at HK$20.5 per square foot in October, slightly down from last month’s historic peak of HK$20.6, said the city’s largest real estate broker Centaline Property Agnecy Ltd in a report released on Monday.

The decline in October was the first time since March 2009, as some investors chose to rent rather than sell their flats, boosting supplies, said Centaline.

However, private housing rents will remain at their current high levels for some time, Centaline added.

The mainland’s inflation eased to 5.5 percent in September, pulling back from a three-year high. The mainland is the largest source of food importation for Hong Kong.

Financial Secretary John Tsang told LegCo on Monday that he expects inflation to peak during the last quarter. However, he warned that the export outlook will be grave due to economic woes plaguing the West.

The government cut its full-year inflation forecast earlier this month to 5.2 percent from August’s estimate of 5.4 percent. As for growth, the full-year GDP forecast was revised to 5 percent, the lower end of August’s estimate of 5 to 6 percent.

joyli@chinadailyhk.com