Malaysian headline inflation strengthened a bit on a sequential basis in the month of July. On a month-on-month basis, the consumer price inflation rose 0.7 percent, mainly driven by the ‘Transport’ components, which contributed 0.7 percentage points. Miscellaneous goods and food components also contributed to the headline figure significantly.
On a year-on-year basis, the CPI inflation dropped at a slower rate of 1.3 percent in July. In addition to ‘Transport’ and ‘miscellaneous goods’, education and alcohol and beverages also gained albeit due to low base effects. Core inflation came in at 1.1 percent on a year-on-year basis, a slight deceleration from June’s 1.2 percent.
“Going forward, inflation is likely to continue to strengthen but at the same time not obstruct monetary policy. Given the weak Q2 GDP outturn last week and concerns over strength of recovery, BNM has ample room to ease further. We expect that BNM will cut its OPR by another 25bps to 1.50 percent in its September meeting”, said ANZ in a research report.
