JUNE HEADLINE INFLATION HITS 3-YEAR LOW
Consumer Price Index for last month slipped to 0.8pc, the lowest since 0.1pc recorded in February 2015
MALAYSIA’S headline inflation rose at its slowest pace in more than three years in June, following the zero-rating of the Goods and Services Tax (GST).
The country’s Consumer Price Index (CPI) was at 0.8 per cent last month, the Statistics Department said yesterday.
This is its lowest since February 2015 when the index was at 0.1 per cent.
The figure is below the 1.3 per cent forecast by a Reuters poll and sharply down from 1.8 per cent recorded in May.
Analysts expect the country’s headline inflation to stay below two per cent this year, from an increase of 3.7 per cent a year earlier, due to lower transport costs after the government fixed some fuel prices at the current rates. The Pakatan Harapan government fixed prices of RON95 at RM2.20 per litre and diesel at RM2.18 per litre after winning the 14th General Election on May 9. The more expensive RON97, meanwhile, was subject to a free float.
MIDF Research expects headline inflation to average at 1.3 per cent this year, while RHB Research Institute Sdn Bhd believes it should moderate to 1.9 per cent.
“This was supported by a lower inflation rate for the first six months at 1.6 per cent compared with four per cent in the same period last year,’ said MIDF Research.
RHB Research economist Vincent Loo Yeong Hong said prices of goods were likely to remain subdued following the zero-rating of the GST from June 1.
“However, this should reverse with the reintroduction of the Sales and Services Tax in September.
“Consumers would still enjoy a three-month tax holiday this year which would likely dampen the inflation,” he said.
Loo believes one last hike in Bank Negara Malaysia’s Overnight Policy Rate of 25 basis points to 3.5 per cent is still on the cards this year.
This would be in line with the United States Federal Reserve raising its policy rate by another 50 basis points amid continued market volatility.
“The anticipated tightening would be a good move to fend off a potentially weaker ringgit following rising fiscal concerns. However, there is a risk that this may be put on hold or delayed, should the country’s economic growth slow more than expected this year,” he said.