RAM EXPECTS HIGHER INFLATION RATE IN AUGUST

KUALA LUMPUR: RAM Ratings expects last month’s inflation rate to increase to 3.8 per cent, following four consecutive months of declines.

The faster pace of growth in consumer prices was underpinned by higher retail petrol prices, which averaged RM2.12/ litre last month (compared with RM1.96 in July), amid strengthening global crude oil prices, it said.

“This will, in turn, raise the transport component’s contribution to overall inflation in August. While the food component is envisaged to remain a key contributor of headline inflation, it is expected to slip slightly, relative to earlier months as demand has moderated after the Hari Raya festive period,” it said.

RAM Ratings has maintained its projected headline inflation at 3.8 per cent this year.

“Overall consumer prices are envisaged to increase at a slower pace in the second half, given theexpected moderation in contribution by the transport component as the low-base effects dissipate.

“With the better-than- expected gross domestic product numbers for the first half of 2017 and stronger potential for demand-pull inflation to become a more prominent feature in the future, we believe there is more room for a 25-basis points hike in the overnight policy rate if the current growth momentum is maintained,” it added.

RAM Ratings said disruptions in oil production will be pivotal to the trajectory of domestic consumer prices.

It said the disrupted output and supply in Libya and the United States last month would likely shore up global oil prices in the following weeks. Bernama