KUALA LUMPUR (Apr 19): AmBank Group Research expects inflation to rise gradually driven by firmer commodities prices and tighter labour market conditions which should result in firmer wages and better disposable spending by households.

In a note today, AmBank group chief economist and head of research Dr Anthony Dass March headline inflation came in lower than both his and consensus expectation at 1.3% year-on-year (y/y), while core inflation was at 1.7% y/y.

He said a high base, strong ringgit against the US Dollar, softer food prices as well as retail pump prices are the key culprits.

“Going forward, we expect inflation to rise gradually driven by firmer commodities prices and tighter labour market conditions which should result in firmer wages and better disposable spending by households.

“With our inflation projection between 2% and 2.5%, we expect Bank Negara Malaysia to normalise its policy rate to 3.50%, most likely in September in which we maintain our 30% chance,” he said.