Singapore's headline consumer price index rose 4.1 percent on the year in September, up slightly from 4.0 percent in August which had been the lowest inflation rate since January 2022. The index rose 0.5 percent on the month after advancing 0.9 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 3.4 percent to 3.0 percent. This is the fifth consecutive decline in core inflation and takes it to its lowest level since March 2022. This index advanced 0.1 percent on the month, as it did previously.

The fall in core inflation in September was largely driven by food prices, up 4.3 percent on the year after a previous increase of 4.8 percent, with the year-over-year increase in retail and other goods prices also slowing from 2.0 percent to 0.9 percent. The impact of these factors of headline inflation was offset by a bigger increase in private transport costs, up 8.5 percent on the year after increasing 6.3 percent previously. Price changes in other categories were steady.

At their semi-annual policy review last week, MAS officials left policy settings unchanged by continuing to target the prevailing rate of appreciation in the exchange rate. Officials advised then that they expected headline inflation to pick up slightly in coming months in response to higher transport costs. Today's data are also consistent with their assessment that the downward trend in core inflation will continue, with officials forecasting it to average between 2.5 percent and 3.5 percent on an annual basis this year. Officials today highlighted both upside and downside risks to the outlook for core inflation.

Consumer prices in September, which in August slowed only a tenth to 4.0 percent, are expected to rise 1 tenth to 4.1 percent.

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.