PETALING JAYA: Inflation has remained moderate since the abolition of the goods and services tax last June, despite the sales and service tax being reintroduced.

Data from the Statistics Department showed that inflation, measured by the change in the consumer price index (CPI), rose at a slower-than-expected pace of 0.2% year-on-year (y-o-y) last December.

The figure was lower than the 0.3% increase projected in a Bloomberg poll of 20 economists.

On a monthly basis, the CPI increased 0.1% as compared to November 2018. For the full year of 2018, the CPI increased 1% y-o-y, which is a nine-year low.

Chief statistician Uzir Mahidin said the rise in December’s inflation was mainly due to higher prices for housing, water, electricity, gas and other fuels, restaurants and hotels, alcoholic beverages and tobacco, education, as well as food and non-alcoholic beverages.

With inflation at muted levels, there would be room for Bank Negara to lower interest rates, if necessary, to boost the country’s slowing economy, experts said.

The central bank in announcing its policy stance yesterday said inflation in 2019 would “average moderately higher” than 1% last year.

MIDF Research forecast inflation for the year to average at 2.2% amid lower base effects.

“We anticipate inflationary pressure mainly from fuel-related items to increase,” the brokerage said.

This is consistent with its expectation on crude oil prices to average at US$75 per barrel for 2019, compared with US$72 per barrel last year, and given that the RON95 fuel subsidy would be targeted to only the bottom 40% households.

“However, the core inflation rate is expected to remain steady in 2019, hovering around 2018’s level of 1% y-o-y,” MIDF said.

Source: https://www.thestar.com.my/business/business-news/2019/01/25/inflation-remains-moderate/#TAdrQ0teYf7MumGt.99