Singapore's headline consumer price index rose 3.7 percent on the year in December, up slightly from 3.6 percent in November, which had been the lowest inflation rate since October 2021. The index advanced 0.4 percent on the month after falling 0.2 percent previously. The Monetary Authority of Singapore's preferred measure of core inflation, which excludes the cost of accommodation and private road transport, also picked up slightly from 3.2 percent in November to 3.3 percent in December. This index advanced 0.6 percent on the month after increasing 0.1 percent previously.

Steady core inflation in December reflects offsetting moves across major categories. Electricity and gas prices rose 1.3 percent on the year after a previous increase of 1.5 percent, while the year-over-year increase in retail and other goods prices picked up from 1.0 percent to 1.1 percent. Private transport costs rose 5.0 percent on the year after increasing 4.2 percent previously, while food price inflation moderated from 4.0 percent to 3.7 percent.

At their semi-annual policy review in October, MAS officials left policy settings unchanged by continuing to target the prevailing rate of appreciation in the exchange rate. Officials today again highlighted both upside and downside risks to the outlook for core inflation and noted that it will be impacted by an impending increase in the goods and services tax rate. Nevertheless, they again expressed confidence that underlying price pressures will"resume a broadly moderating trend" after the impact of the tax increase.

Consumer prices in December, which in November eased broadly and sharply to 3.6 percent from 4.7 percent, are expected to edge further lower to 3.5 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.