Friday 29 Mar 2024
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KUALA LUMPUR (Mar 22): AmBank Group Research said Malaysia’s February headline inflation moderated to 1.4% year-on-year (y/y) while core inflation is at 1.8% y/y, beating both house and market expectation of 1.8% y/y and 1.9% y/y respectively for the headline inflation.

In a note today, AmBank group chhief economist and head of research Dr Anthony Dass said this allows for real returns to grow wider to 1.8% in February from 0.5% in January. 

He said apart from softer food prices which were up 3.0% y/y, the drag came from transport prices (-0.3% y/y) as well as the impact from a stronger US dollar/ ringgit (USD/MYR) and the base effect.

“We foresee inflation remaining soft as we move forward due to: (1) the high base effect; (2) USD/MYR is on a stronger mode and hence will ease import price pressures and transfer pricing; and (3) firm oil prices of WTI and Brent to average around US$57 per barrel and US$61 per barrel respectively. 

“Thus, we expect the real returns to be in the positive region throughout 2018.

“With our baseline view for the overnight policy rate (OPR) to stay at 3.25% and inflation averaging between 2.5% and 2.8%, the real returns should hover 0.4% to 0.7%. If the OPR is raised to 3.50%, the real returns would average around 0.7% to 1.0%,” he said.

 

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