Singapore's headline consumer price index rose 5.5 percent on the year in March, down from the 6.3 percent increase recorded in February, and rose 0.5 percent on the month after an increase of 0.6 percent previously. The Monetary Authority of Singapore's preferred measure of core inflation, which excludes the cost of accommodation and private road transport, fell from 5.5 percent to 5.0 percent with this index rising 0.2 percent on the month after no change previously.

The fall in headline inflation in March was broad-based across categories. Food prices rose 7.1 percent on the year after advancing 8.1 percent previously, with the year-over-year increase in private transport costs slowing from 12.1 percent to 8.6 percent. Prices for services, retail and other goods, and accommodation also rose at a slower pace.

MAS officials expect core inflation to"remain elevated" in the first half of this year before moderating in the second half. An increase in the goods and services tax this year will deliver a one-off increase in prices, and officials forecast that core inflation will average between 3.5 percent and 4.5 percent in 2023 when the impact of the tax increase is included, and average between 2.5 percent and 3.5 percent when that impact is excluded.

At its most recent semi-annual policy review held earlier in the month, the MAS announced it will retain current monetary policy settings. The MAS pursues its inflation and growth objectives by adjusting the direction, slope, width, and central level of an undisclosed"band" around its measure of Singapore's nominal effective exchange rate. Officials left those parameters unchanged in order to target the prevailing rate of appreciation in the exchange rate.

The Consumer Price Index (CPI) measures the average price changes in a fixed basket of consumption goods and services commonly purchased by the resident households over time. It is commonly used as a measure of consumer price inflation.

The CPI is rebased once every five years to reflect the latest consumption patterns and composition of goods and services consumed by resident households. The weighting pattern for the 2014-based CPI was derived from the expenditure values collected in the Household Expenditure Survey (HES) which was conducted from October 2012 to September 2013. These expenditure values were updated to 2014 values by taking into account price changes between 2012/13 and 2014.

The CPI covers only consumption expenditure incurred by resident households. It excludes non-consumption expenditures such as loan repayments, income taxes, purchases of houses, shares, and other financial assets etc.

An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets and your investments.

Inflation (along with various risks) basically explains how interest rates are set on everything from mortgages and auto loans to government securities. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities and your portfolio, often in a dramatic fashion.

By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.