KUALA LUMPUR (June 21): AmBank Group Research said Malaysia’s May headline inflation of 1.8% year-on-year was the fastest gain in four months due to a strong recovery in transport prices as well as prices of food and non-alcoholic beverages.

In a note today, AmBank grouo chief economist and head of research Dr Anthony Dass said moving forward, he expects inflation to stay modest despite some upwards pressure from demand as the cost side of the equation is poised to stay stable.

“We expect the current 3.25% overnight policy rate (OPR) to remain throughout 2018.

“We feel there is no real urgency for Bank Negara to raise rates given that: (1) the economy is sitting in comfortable positive real returns; (2) the ringgit is still stronger against the USD when compared to regional currencies versus the USD; and (3) no real demand pull inflationary pressure despite an uptick in consumer spending with fuel subsidies, the removal of the GST that will be replaced with the SST, and better confidence.

“We maintain our 2018 inflation at 2.0%–2.5%,” he said.