HEADLINE INFLATION LIKELY EASED IN OCT

Consumer Price Index may average 4.03 per cent, down from 4.3 per cent in September

RUPA DAMODARAN

KUALA LUMPUR rupabanerji@mediaprima.com.my

MALAYSIA’S headline inflation, measured by the Consumer Price Index (CPI), may have eased in October, according to NST Business poll.

The poll indicated that the CPI likely averaged about 4.03 per cent, down from the 4.3 per cent recorded in September.

Eight institutions polled have forecasts of between 3.8 and 4.3 per cent, with Nomura Research being most optimistic with 3.8 per cent, followed by DBS Bank and Standard Chartered Bank Bhd with 3.9 per cent each.

The Statistics Department will release the data today.

Bank Negara Malaysia said last week headline inflation was expected to average at the upper end of three to four per cent this year.

Headline inflation moderated to 3.8 per cent in the third quarter mainly due to lower transport inflation.

Affin Investment Bank Bhd expects the CPI to average around 2.5 to 3.0 per cent next year.

“However, with stable core inflation, and continued expansion in productive capacity to contain further increases, we expect headline inflation to average around 2.5-3.0 per cent next year, but the trend will depend on uncertainty in future global oil prices.”

It expects Bank Negara’s Overnight Policy Rate to rise 25 basis points to 3.25 per cent in the middle of next year from the current three per cent.

Standard Chartered Bank economist Edward Lee cautioned that the CPI may remain elevated in October.

“It will be slightly lower than the 4.3 per cent in September, helped slightly by a favourable base effect,” he said.

Fuel prices were up 15-21 per cent year-on-year, although prices will be slightly lower on a monthon-month basis, he added.

“Food inflation is likely to remain high until the base effect starts to turn higher this month (due to cooking oil subsidies, which were reduced in November last year).

“We expect core inflation to have risen slightly to 2.5 per cent year-on-year from 2.4 per cent in September. The central bank had telegraphed its hawkish intent in this month’s monetary policy statement and we expect it to hike in January. But the risk is for no hike rather than a series of hikes,” Lee said.