Malaysia’s core inflation is expected to stay relatively modest and the Bank Negara Malaysia (BNM) to maintain its policy rate at 3.00 percent throughout 2017. Also, at this juncture, growth dynamics do not point to the emergence of strong demand-pull inflationary pressures.
Malaysia’s headline inflation has likely peaked in March as retail pump prices continued to decline in May. Headline inflation eased to 4.4 percent y/y in April as the pace of increase in transport prices moderated.
During the month, core inflation, which excludes volatile items of fresh food and administered prices of goods and services, remained stable at 2.5 percent y/y. The increase in core inflation has been relatively modest compared with higher headline inflation.
"For the first three weeks of May, we estimate fuel price to be lower by 4 percent m/m but still 23 percent y/y higher compared with the preceding year. Given that the weight of fuel and lubricants in the CPI basket is 7.8 percent, this could potentially add 1.8ppt to May’s headline CPI inflation," ANZ Research commented in its latest research report.


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