Nomura Research sees Malaysia’s inflation averaging 3% for 2018

PETALING JAYA: Nomura Global Markets Research has forecast an average consumer price index (CPI) inflation of 3% for 2018 after the February inflation rate declined from a month ago.

It said CPI fell to 1.4% year-on-year in February from 2.7% in January, well below consensus expectations of 1.9% but closer to its forecast of 1.6%.

“The decline in February CPI inflation was mainly driven by the transport component falling to -0.3% year-on-year from 5.7% in January because of a slight decline in fuel prices this year in addition to a base effect from substantial fuel price hikes last year,” it said.

Nomura Research said the official measure of core inflation fell to 1.8% in February from 2.2% in January.

Seasonally adjusted headline CPI inflation was flat month-on-month in February after a 0.3% increase in January.

“In the near term, we expect headline CPI inflation to remain broadly stable in March before rebounding in April, when the base effect will reverse,” it said.

Nomura Research said for 2018, it expected average CPI inflation of 3%.

“Core inflation should, in our view, remain well behaved, even if it does creep higher.

“This supports our forecast for Bank Negara to leave its policy rate unchanged at 3.25% for the rest of this year.

“Bank Negara appears to have signalled as much by no longer describing its policy stance as ‘accommodative’ at the last meeting on March 7.

“The window for rate hikes is also closing, as we expect the general election to be called sometime in late April or early May,” it said.