Thailand
Malaysia’s CPI advances at slowest pace in 42 months
PETALING JAYA: Helped by an easier rise in the prices of fuels, Malaysia’s inflation moderated to its slowest pace in 42 months in August, lower than consensus estimates.
This, according to economists, strengthens expectations that Bank Negara will keep interest rates unchanged at the current “accommodative” level till the end of this year amid the need to balance between the risks of capital outflows and slower economic growth in the country.
Data released by the Statistics Department yesterday showed that the consumer price index (CPI), a gauge of inflation, rose by a mere 0.2% last month from a year ago, compared with an increase of 0.9% year-on-year (y-o-y) in July 2018.
The number came in below market expectations of a 0.4% increase in CPI for August 2018.
Chief statistician Datuk Seri Mohd Uzir Mahidin said last month’s CPI number was the lowest rate in 3.5 years, and this was due mainly to the lower impact in the cost of fuels.
“CPI rose by 0.2% in August 2018, registering the lowest rate within 42 months.
“This slowdown movement was due to the impact of cost of fuels, which caused the index for transport increased 2.1%, as compared to the 6.7% recorded in July 2018,” he explained.
For the January-August 2018, CPI rose 1.3% as compared to the corresponding period last year.
However, with the sales and services tax (SST) taking effect on Sept 1, inflation is expected to trend higher from this month onwards.
“We expect CPI to rebound to 1.1% y-o-y in September due to the reinstatement of the SST, and maintain our inflation forecast of an average 1.2% for the full year,” Nomura Research said.
“We still expect Bank Negara to leave its policy rate unchanged this year, but see a risk of it sounding increasingly cautious on growth in future monetary policy statements, and hence we do not rule out the possibility of a rate cut in 2019,” it wrote in its report.
The international brokerage explained that while rate cuts did not seem to be in the cards through the remaining part of 2018, Malaysia’s gross domestic product (GDP) growth would likely come in below Bank Negara’s estimate of 5%.
Nomura Research has forecast the country’s GDP growth to be 4.7% in 2018, implying a slowdown in the second half of the year to 4.5% y-o-y from 4.9% in the first half, before slipping lower to 4.2% in 2019.
Source: https://www.thestar.com.my/business/business-news/2018/09/20/malaysias-cpi-advances-at-slowest-pace-in-42-months/#qSY0ktvsJwKpEjZO.99