Malaysian headline inflation accelerates sharply in June

Malaysian headline and core inflation accelerated sharply in June, owing to a low base on account of last year’s changes in tax policy. Sequentially, the headline consumer price inflation showed no change in June after a 0.2 percent sequential rise in May. Nevertheless, a low base effect because of the zero-rating of the GST in this period last year, saw annual inflation jump to 1.5 percent in June.

Food prices rose at a slower rate than anticipated in June, rising at 0.1 percent. ‘Restaurants and hotels’ and ‘miscellaneous goods’ prices also added positively to inflation in the month. Nevertheless, this was entirely countered by a decline in domestic fuel prices.

Similarly, core inflation in June also accelerated to 1.9 percent year-on-year from 0.4 percent in spite of sequential rise in the month. Soft growth momentum and the absence of demand-pull pressures imply that core inflation is expected to stay benign, noted ANZ in a research report.

“Headline inflation is expected to remain around current levels. The removal of the price cap for RON 95 gasoline has been delayed, possibly to the end of the year. This delay should limit any upside risk to inflation from any unanticipated increases in global crude oil prices”, added ANZ.