GEORGE TOWN (Sept 25): MIDF Research maintained its inflation target of 2% to 2.5% for 2015, while forecasting the consumer price index (CPI) to be at 2.7% year-on-year (y-o-y).

In an economic review note, MIDF Research said the upward momentum from imported inflation and goods and services tax (GST) implementation is expected to continue for higher headline inflation.

“We forecast September inflation to be at 2.7%. However, low pump price at RM1.95 per litre is expected to curb inflationary pressure and will continue to do so in the coming months. We are maintaining our 2015 average forecast, with the range of 2% to 2.5%,” it said.

On Wednesday, the Statistics Department of Malaysia announced the August inflation, measured by the CPI, rose 3.1% as compared to the corresponding month in 2014, due to costlier liquor and tobacco products.

CPI rise was also a result of more expensive healthcare services, besides higher restaurant and hotel charges.

Cumulative eight-month CPI rose 1.9% from a year earlier, and in monthly terms, August CPI was unchanged compared to July, when it climbed to 3.3% from a year earlier.

MIDF Research noted the CPI remained at 113.9 in August, resulting in a 0% change on month-on-month basis (m-o-m) basis.

“However, it should be noted that the unchanged CPI is not a result of a stagnant price, rather due to the higher price of foods, which had offset the deflationary pressure coming from the lower pump price.

“According to the data by Statistics Department, the oil price constitutes 8.77% of the CPI basket, the third highest after house rental at 17.24% and food away from home of 10.04%.

“Year-to-date, CPI has grown by +1.85%, in line with our 2015 forecast of 2.2%,” MIDF Research noted.

In reiterating the results, MIDF Research said when oil price was excluded from the equation, inflation surged to a much higher level of 3.7%, compared to July’s inflation ex-fuel of 3.49%.

“Currently there are higher inflationary pressure coming from imported inflation and upward momentum from GST implementation.

“However, since Malaysia’s domestic pump price follows the three-month moving average global market prices, domestic inflation could be curbed at a moderate level for the rest of the year,” it added.