‘INFLATION TO STAY BELOW 1pc IN AUGUST, SEPTEMBER’

KUALA LUMPUR: The prices of goods and services have begun decreasing since the beginning of this month while inflation is expected to go below one per cent in August and September, following the move to zero-rate the Goods and Services Tax.

However, United Overseas Bank (M) Bhd (UOB) economist Julia Goh said whether the inflation rate could sustain at that level would largely depend on the Sales and Services Tax to be reintroduced in September.

She said Bank Negara Malaysia, which expected inflation to hover between one and two per cent this year, would most likely review the projection.

“We expect the new inflation projection to be announced during the tabling of the 2019 Budget,” she said in a research note.

Inflation stood at 1.8 per cent last month compared with 1.4 per cent in April, which was slightly higher than UOB’s expectations of 1.6 per cent.

The main components that contributed to the slight increase last month was housing, utilities and transport.

Goh said the bank expected the Overnight Policy Rate (OPR) to remain at 3.25 per cent for the rest of the year.

MIDF Research, meanwhile, expects this year’s inflation rate to be 2.6 per cent.

The forecast is based on the back of the central bank’s healthy financial policies and no expected OPR hikes.