JAN HEADLINE INFLATION LIKELY LOWER AT 2.9PC
KUALA LUMPUR: The headline inflation is expected to have fallen to 2.9 per cent last month from 3.5 per cent in December, said RAM Rating Services Bhd.
The more moderate inflation rate is primarily attributed to lower growth contribution from transport fuel amid high-base effects the previous year.
For the full-year, RAM expects the headline inflation to ease to 2.5 per cent, underpinned by lower contribution from the transport component.
Transport inflation was unlikely to repeat last year’s doubledigit growth trajectory, without the low-base effects from retail fuel prices, said RAM research head Kristina Fong in a statement.
“That said, food inflation could well accelerate this year on account of stronger consumption and the potential spillover effects from the upward revision of gas tariffs. We have observed some ripple effects in the ‘food away from home’ component with the removal of some cooking oil subsidies at the end of 2016,” she said.
Fong added that durable goods inflation, which had been moderating since mid-2016 amid sluggish discretionary spending, might experience a greater impetus for price growth as purchasing power improved.
The average price of RON95 increased 20 sen to RM2.10 per litre between December 2016 and January last year, although average prices stayed relatively stable (up one sen) at RM2.28 per litre between December last year and last month.
RAM said the Overnight Policy Rate (OPR) was expected to remain at 3.25 per cent for the rest of the year, following a 25 basispoint hike last month.
This is guided by RAM’s expectations of more moderate gross domestic product (GDP) growth and inflation of 5.2 and 2.5 per cent, respectively, this year.
“Although we do not foresee further upward movement for the OPR, Bank Negara Malaysia’s future actions are envisaged to be data-dependent.
“Another rate hike may be warranted if GDP growth surprises on the upside and inflationary risk heightens,” it added.