Malaysian headline inflation moderates in July, to continue to moderate in H2 2017

Malaysian inflation data released earlier on Wednesday showed that the headline print continued to moderate in July, greatly reflecting lower crude oil prices and a slower rate of rise in the prices of food items.

On a sequentially seasonally adjusted basis, the consumer price inflation in the nation dropped 0.1 percent in the month, marking the fifth straight monthly fall. Underlying the drop was a 1.1 percent sequentially seasonally adjusted decline in transportation costs, an outcome of lower crude oil prices.

The sharper drop in non-food inflation and flat food prices led to inflation undershooting the estimate for sequential inflation. Core inflation, which is Malaysia’s case excludes prices of fresh food and administered prices, rose a bit to 2.6 percent year-on-year from 2.5 percent year-on-year in June.

On a sequential basis, it was nearly flat. Given the fact that the inflation trajectory is consistent with BNM’s expectations, July’s inflation down draft does not make a case for an alteration in the policy rate, noted ANZ in a research report.

“We continue to expect headline inflation to moderate in H2 2017, consistent with Bank Negara Malaysia’s (BNM) anticipated trajectory. The real policy rate is gradually returning to positive territory which in turn should enhance ringgit stability”, added ANZ.

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest