KUALA LUMPUR: Malaysia's inflation grew faster in July 2015 of 3.3% to 113.9, compared with 2.5% in June , coming in above market consensus of 2.9%.

The strong consumer price index (CPI) growth was mainly driven by a 13.3% year-on-year increase in the alcoholic beverages and tobacco component, said the Statistics Department in a statement yesterday.

Meanwhile, the healthcare component rose 4.8% year-on-year, miscellaneous goods and services grew 4.7%, restaurants and hotels increased 4.6%, furnishing, household equipment and routine household maintenance climbed 3.9%, while food and non-alcoholic beverages gained 3.8%.

“All six of the categories have total weightage of 47.4, contributing as much as 66.8% to the rise in the CPI for July 2015. Besides that, the index was also affected by the rise in recreational and cultural services (up 1.9%), transportation (up 1.6%) and a slight increase in the clothing and apparel segment (up 0.9%),” it said.

The Statistics Department said on a month-on-month basis, the index rose 0.8% and grew 1.7% for the first seven months of 2015.

JF Apex Research said inflation growth for the month was above its expectation, with the research house forecasting a continued uptrend in the CPI.

“For August 2015, we envisage that CPI will continue its growth by 3.6% amid the recovery recorded in July coupled with improvement in the transport component,” said the research house.

The research house also revised its inflation forecast to 2.5% from 3% for 2015, based on the weaker growth of 1.7% for the January to July 2015 period, coupled with lower retail fuel prices and postponement of the electricity tariff hike for the year.

It added that there will be no increase in PLUS toll rates this year, but expects a 5% hike after the rates are reviewed in 2016.

With the moderate projection, JF Apex expects Bank Negara Malaysia (BNM) to keep the overnight policy rate at 3.25% in 2015, as inflation is still manageable.

Meanwhile, UOB Global Economic & Markets Research expects inflation to pull back in August, noting that petrol prices were cut by 10 sen across the board this month.

This follows the hike in domestic petrol prices by 10 sen and 20 sen respectively for RON95 and RON97 to RM2.15 and RM2.55 per litre in July.

For the year, the research house expects “moderate inflation pressure, despite the weaker ringgit, falling commodity prices, spillover effects of the goods and services tax implementation and weaker domestic demand”.

“We forecast average inflation at 2.1% in 2015 and 2.7% in 2016,” it said, adding that it expects BNM to stand pat on interest rates for now.

This article first appeared in digitaledge Daily, on August 20, 2015.