Thursday 28 Mar 2024
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KUALA LUMPUR (July 19): AmBank Group Research said Malaysia’s headline inflation in June grew at a slower pace by 0.8% year-on-year (y/y) compared to 1.8% y/y in May, bringing the 1H2018 average to 1.6%.

In a note today, AmBank group chief economist and head of researhc Dr Anthony Dass said core inflation rose 0.1% y/y in June versus 1.5% y/y in May, translating to 1.5% in 1H2018.

He said the slower inflation was largely due to softer prices of food and non-alcoholic beverages and broad utilities which increased by 0.8% y/y and 1.5% y/y compared to 2.2% y/y and 2.1% y/y respectively.

“Based on the current inflationary trajectory and Bank Negara Malaysia’s (BNM) outlook during the recent MPC meeting which cited that the headline inflation may fall into negative territory, we feel BNM will likely maintain the OPR at 3.25% for the rest of 2018.

“Nevertheless, we are pricing in a low possibility of a rate cut, which has increased from near zero to 20%. We feel that such move will go against the current tide of rate hike not only in the US but also several countries in this region,” he said.

Dass said such an opposing trend will intensify the weakening pressure on the ringgit and equity markets.

“Besides, we feel the 2018 gross domestic product for Malaysia should fall within our forecast of 5.5% with the lower end at 5.3%.

“While the probability is still low for a rate cut, we revise downwards our inflation projection to 1.5% from 2.1%,” he said.

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