Singapore's core inflation came in at 1.8 per cent last month, dipping slightly from August's 1.9 per cent.
Headline inflation remained unchanged from August, at 0.7 per cent, even though the market expected the year-on-year rise in consumer prices to quicken.
Inflation came in below market expectations, with analysts predicting core inflation at 1.9 per cent and headline inflation at 0.8 per cent, according to a Bloomberg poll.
Core inflation strips out accommodation and private road transport costs.
The decline in core inflation came from slower growth in retail prices of items like clothing and shoes, which offset the higher price increases in services, said the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) in a joint statement.
Prices of retail items rose by 1.5 per cent year on year - slowing from the 2 per cent increase previously. There was also a steeper fall in the prices of recreation and entertainment goods, and telecommunications equipment.
Services inflation, in contrast, went up by 1.4 per cent last month, slightly higher than the 1.3 per cent in August, while food prices moderated to 1.6 per cent last month from 1.7 per cent in August.
Accommodation costs, which include rent, fell by 2.5 per cent last month, easing from the 2.6 per cent decline in August. Private road transport costs also fell by 0.1 per cent last month, compared with the previous month's 0.2 per cent decline.
Looking ahead, the MAS and MTI said imported inflation is likely to increase on account of higher global oil and food prices.
Imported inflation, reflected in the prices of raw materials used in Singapore such as oil, will weigh on consumer spending for the rest of this year and next year, said a Fitch Solutions Macro Research report. It estimates oil prices to rise from US$75 per barrel this year to US$82 per barrel next year.
This trend will likely result in higher utilities cost and public transport fares in the future, said SIM Global Education senior lecturer Tan Khay Boon, adding that these effects will be felt more by the average household.
The need to keep imported inflation under control was one of the reasons why MAS tightened its monetary policy stance earlier this month, said analysts.
Ongoing geopolitical conditions, such as US-China trade tensions, add to the inflationary pressures too, said Singapore Management University assistant professor of finance Aurobindo Ghosh.
On the home front, the improving labour market could see a faster pace of wage growth this year and next year, compared with last year, said MAS and MTI. But this could also fuel higher prices due to stronger domestic demand and higher labour costs.
"However, if wage growth outstrips the rate of inflation, then we see an increase in real wage rate that will indeed mean stronger purchasing power going forward," said Prof Aurobindo.
MAS and MTI expect core inflation to rise moderately in the months ahead, averaging between 1.5 and 2 per cent for the full year.