‘SST LIKELY TO HAVE MODERATE PRESSURE ON INFLATION’
SST transition will not significantly impact weak inflation trajectory, says AmResearch chief economist
AMBANK Research (AmResearch) expects moderate pressure on inflation after the implementation of the Sales & Services Tax (SST) next month.
Chief economist Dr Anthony Dass said the transition would not deviate significantly from the ongoing weak inflation trajectory.
“The current inflation trajectory and a slower gross domestic product outlook of 4.8 to five per cent for this year suggest that policymakers have room for a 25 basis points interest rate cut,” he said.
However, Anthony said such probability remained low given that the rising global interest rates were putting a lid on an interest rate cut.
“The interest rate cut will result in interest rate differential that will not favour us, hence adding pressure on the ringgit to weaken. We expect the Overnight Policy Rate to remain unchanged at 3.25 per cent,” he said.
Headline inflation last month came in line with market consensus but was slightly higher than AmResearch’s expectation of 0.6 per cent.
It increased 0.9 per cent yearon-year in July from 0.8 per cent in June.
This brings the inflation to an average of 1.5 per cent for the first seven months of this year.
Meanwhile, underlying inflation contracted by 0.2 per cent year-on-year versus 0.1 per cent in June, suggesting the price pressure in the economy remains largely subdued on the back of the three-month tax holiday.