SINGAPORE - The Government has lowered its overall inflation forecast for this year on the back of lower oil prices, as it released latest monthly data showing consumer prices cooling in January.

Given the sharp decline in global oil prices in recent months, the forecast for overall inflation has been lowered to between 0.5 per cent and 1.5 per cent, from 1 per cent to 2 per cent previously, the Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) said in a joint release on Monday.

The forecast for core inflation - which excludes accommodation and private transport costs - remains unchanged at between 1.5 per cent and 2.5 per cent, reflecting the smaller weight of oil-related items in this measure, they said.

MAS and MTI added that the extent of overall price increases will be capped by greater market competition in several consumer segments such as telecommunications, electricity and retail.

For January, all-items or overall inflation eased to 0.4 per cent compared to the same period in 2018, and was down from 0.5 per cent in December. This reflected a slower pace of increase in the cost of electricity and gas, which outweighed higher inflation in services, said MAS and MTI.

Likewise, core inflation dipped to 1.7 per cent from 1.9 per cent.

Maybank Kim Eng economist Chua Hak Bin said the drop in core inflation is likely to "provide some breathing space, and take the pressure off for MAS in April to tighten monetary policy further".

He added that inflation numbers across the region have been "benign", with slowing global growth reducing price pressures as well.

"Part of the reason for the collapse in trade and exports is that businesses are in a deep freeze on their investment plans," said Dr Chua, referring to ongoing trade tensions and uncertainty. "We're all hoping that US and China will come to some kind of trade deal in the coming weeks, if not months... If there is a deal, I hope some of these companies' business sentiment will re-ignite, which will lead to some recovery in business investments. Correlated with that is trade."

January's inflation figures were also lower than expected, with a Bloomberg poll of analysts predicting the headline inflation reading to come in at 0.6 per cent, with core inflation tipped at 1.8 per cent.

The cost of electricity and gas rose at a slower pace of 6.5 per cent in January, down from 14.6 per cent in December. "This was largely due to a downward revision in electricity tariffs given lower oil prices in the preceding months, as well as the effect of the phased nationwide launch of the Open Electricity Market on electricity prices," said MAS and MTI.

Meanwhile, the overall cost of retail items rose by 1.4 per cent year-on-year, slowing from the 1.7 per cent increase in December. This was due to a steeper decline in prices of telecommunication equipment, and recreation and entertainment goods, as well as a slower pace of increase in prices of household durables and supplies.

Food inflation came in at 1.4 per cent, unchanged from the month before.

Services inflation picked up to 1.7 per cent, from 1.5 per cent in the previous month. This was mainly on account of an increase in public transport fares, which outweighed a smaller rise in holiday expenses.

But there were declines in private road transport costs, as well as accommodation costs.

Private road transport costs dropped 3.4 per cent, less than the 3.7 per cent fall in December. This came as the pace of reduction in car prices eased, more than offsetting lower petrol prices.

Accommodation costs fell by 1.9 per cent, seeing the same pace of decline as in the previous month. This was due to a more gradual fall in housing rentals offsetting a smaller rise in the cost of housing maintenance and repairs.