Inflation in Singapore accelerated slightly to 1.6% (vs. consensus 1.8%) in November after erasing to a more than three-year low of 1.4% in October from 2.0% in September. The slower pace of increase was led by a smaller decline in private transport costs due to a pickup in car prices (-0.7% y/y in November vs. -2.5% in October).

The core reading of the consumer price index, which excludes the costs for accommodation and private transport, rose 1.9% on the year in November, moderating from a 2.1% rise in October in light of slower gains in food and services prices.

Stable global energy prices and a firmer Singapore dollar have put a lid on import costs. Domestic unit labour costs are projected to rise more gradually alongside moderating nominal wage growth and improving productivity. This should lead services inflation in Singapore to ease further.

The Monetary Authority of Singapore expects core inflation to average in a range of 2.5% to 3.0% in 2024 before slowing further to a range of 1.5% to 2.5% in 2025.

Overall, risks to the inflation outlook for 2025 are relatively balanced, MAS said in the November CPI report."Domestically, stronger-than-expected labour market conditions could lead to a slower easing in unit labour cost growth," it said.

Heightened geopolitical tensions may push up commodity prices and thus imported costs while a significant downturn global growth could induce a greater easing of cost and price pressures, causing domestic inflation to come in lower than expected, the central bank said.

In its quarterly monetary policy statement issued on Oct. 14, MAS viewed the monetary policy settings as consistent with medium-term price stability and thus maintained the prevailing rate of appreciation of the Singapore dollar's nominal effective exchange rate policy band.

After a muted 1.4 percent year on year rise in October, forecasters expect November up a bit more at 1.8 percent on year.

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.