KUALA LUMPUR (Nov 27): AmBank Research said Malaysia headline inflation in October rose 3.7% as both the food and non-food prices grew at a slower pace by 4.4% year-on-year (y-o-y) and 3.4% y-o-y respectively while fuel price climbed 20.5% y-o-y.

In a note today, AmBank group chief economist and head of research Anthony Dass said that meanwhile, core inflation remained stable at 2.3% y-o-y in October and is expected to inch up in the coming months fuelled by a stronger gross domestic product (GDP) of 5.9% average for three quarters and hike in private sector wages which were up 7.3% y-o-y in 3Q2017 for the second consecutive quarter after hovering around 4% in the previous 5 quarters.

“We project inflation to stay around 4.0% for 2017 and 2.5% – 3.0% for 2018.

“With the economy being in negative returns since January 2017, added with strong GDP growth and healthy private wages, we expect Bank Negara Malaysia to institute its first rate hike by 25 basis points (bps) in January 2018 and another 25bps hike most likely in 3Q2018, which should normalise the OPR rate to 3.5%,” he said.