KUALA LUMPUR: The Consumer Price Index (CPI) for October came in at 2.8 per cent year-on-year, lower than market expectations.
The Statistics Department attributed the rise mostly to the increase in the index
for transport by 5.3 per cent, restaurants
and hotels (4.6 per cent ) as well as housing, water, electricity, gas and other fuels and health.
Credit Suisse economist Michael Wan said the downside surprise was due to “muted” second round pass through from October fuel price hike and some “temporary help” from cigarette prices.
Core inflation ( which excludes alcohol and tobacco), has dropped from two per cent to 1.8 per cent.
Alcohol and tobacco inflation rose just 0.2 per cent year-on-year, down from 15 per cent year-on-year the previous month.
This, he commented, is temporary as tobacco companies have recently increased cigarette prices by around 12 per cent to 14 per cent following excise duty hikes by the government, which should add back around 0.2 to 0.3 percentagge points to headline CPI.
The research house expects the CPI to record a 3.8 per cent growth next year,
“We see several mitigating factors — the government’s zero-exempt list (41 per cent weight in the CPI basket), global commodity prices and weaker private consumption spending and gross domestic product next year.”
Wan does not expect Bank Negara Malaysia to increase policy rates too, with credit growth moderating, rising uncertainty in global growth and weak commodity prices.