Singapore's headline consumer price index rose 1.2 percent on the year in January, down from the increase of 1.5 percent recorded in December. The index fell 0.7 percent on the month after advancing 0.3 previously. The Monetary Authority of Singapore's preferred measure of core inflation, which excludes the cost of accommodation and private road transport, also slowed from 1.7 percent in December to 0.8 percent in January. This index fell 0.2 percent on the month after increasing 0.5 previously.

The fall in core inflation in January was largely driven by a smaller increase in prices of services, up 1.0 percent on the year after a previous increase of 1.6 percent, with food price inflation also moderating from 2.3 percent to 1.5 percent. Electricity and gas prices fell 2.9 percent after a previous increase of 2.4 percent. Private transport costs, in contrast, rebounded sharply, up 2.8 percent on the year after a previous decline of 0.9 percent.

Officials at the MAS announced they would target more modest and gradual appreciation of Singapore's exchange rate at their last quarterly meeting last month. They also expect core inflation will be more subdued that previously forecast, revising down their forecast for it to average between 1.5 percent to 2.5 percent in 2025 to a forecast of between 1.0 percent and 2.0 percent. Based on this assessment, officials concluded that an adjustment in policy settings was required to ensure medium-term price stability.

CPI is expected to rise 0.5 percent on the month in January and to rise 2.3 percent from a year ago versus 0.3 percent on the month and 1.6 percent on the year in December.

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.