KUALA LUMPUR: MIDF Research expects a tepid headline inflation rate of 1.3 per cent for the whole year as compared with 3.8 per cent in 2017.
In a note, the research house said this is supported by a lower inflation rate of 1.2 per cent for the first nine months compared to 3.9 per cent in the same period last year.
“We expect inflationary pressure mainly from fuel-related items to calm, consistent with a gradual rise in global commodity prices on top of the pass-through effect from a strengthening ringgit (USD/MYR average: 4.32 in 2017, against our forecast of 4.00 in 2018) and subsidy of domestic fuel prices,” it said.
MIDF Research added that as inflationary pressure remains benign, it anticipates Bank Negara to maintain its current monetary stance for the rest of 2018 barring any surprises in domestic economic growth.
In September 2018, the consumer price index increased 0.3 per cent year-on-year (y-o-y), marginally higher than 0.2 per cent (y-o-y) recorded in the preceding month and in line with MIDF’s expectation.
“The trivial increase was anticipated as the Sales and Services Tax (SST) returned in September 2018, but the inflation rate still remained below one per cent for the fourth consecutive month despite the reintroduction of the SST, probably due to the significant impact of RON95 fuel subsidisation,” it added.
Transport prices increased but at a far slower pace of 0.3 per cent y-o-y (2.1 per cent y-o-y in August 2018).
Meanwhile, core inflation rebounded to a positive territory of 0.3 per cent y-o-y after remaining at a deflationary level for the past two consecutive months.
“Looking ahead, Malaysia’s inflation is expected to gradually increase in the upcoming months,” MIDF said.