KUALA LUMPUR, July 17 — RAM Rating Services Bhd (RAM Ratings) expects inflation in Malaysia to ease to 3.7 per cent in June 2017 compared with 3.9 per cent in May, on the back of easing fuel inflationary pressure.
The price of RON95 petrol was revised downwards every week throughout June, causing the average price to fall to a five-month low of RM2.00/litre compared with RM2.09/litre in May.
This had reduced the transport sector’s contribution to headline inflation.
By contrast, food prices had recorded a slightly faster rate of increase, as a run-up in demand leading up to the month of Ramadan and Hari Raya Aidilfitri had created some upward pricing pressure, the rating agency said in a statement today.
But, with the enforcement of price-control during the festive season, the rate of increase for food prices in June were unlikely to have accelerated much from the 4.4 per cent for May.
The rise in food prices are expected to taper off as the festive season comes to a close and prices would normalise through the rest of the year, RAM said.
The rating agency had maintained its projected headline inflation in Malaysia at 3.8 per cent for 2017.
Food and transport fuel were expected to remain the key drivers of overall price growth this year, it said.
“Although the current upward price momentum is still primarily cost-push driven, the faster pace indicates a stronger potential for demand-pull inflation to become more prevalent,” it added.
RAM Ratings believed that there was room for a 25 basis points hike in the overnight policy rate towards the end of the second half of 2017, the statement added. — Bernama