Financial Secretary Henry Tang says the Government is closely monitoring international oil prices and their impact on the local economy.

Speaking in Beijing today, Mr Tang said prices have been very volatile, staying at high levels in recent months, and Hong Kong is on alert as its open economy may be affected by factors like interest rate and oil price changes.

He said the surge will affect the local economy, particularly the transport trade. The Economic Development & Labour Bureau is monitoring retail prices and liaising with oil companies.

When asked if the price surge will lead to further inflation, Mr Tang said Hong Kong has recorded slight inflation of 0.8% recently, adding that the economy will still be healthy if the inflation rate is around 2% to 3%.