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Malaysian headline inflation accelerates in September, likely to reach 3.8 pct in 2017

The consumer price inflation of Malaysia accelerated in the month of September, highlighting a more rapid rate of rise in transport costs, noted ANZ in a research report. On a sequential seasonally adjusted basis, Malaysia’s headline inflation rose for the second consecutive month by 0.3 percent in September. On a year-on-year basis, inflation accelerated to 4.3 percent.

The rise in inflation was underpinned by a 2 percent sequential rise in transportation costs, 0.2 percent rise in housing and utilities costs and 0.2 percent in food prices. However, core inflation, which strips prices of fresh food and administered prices, continued to be stable at 2.4 percent. On a sequential basis it was nearly flat.

The trajectory of inflation is expected to be greatly influenced by retail fuel prices that contribute 7.8 percent to the CPI basket. According to ANZ, inflation is likely to stay around 4 percent year-on-year in October because of low base effects and increased Brent oil prices around USD 55-60/bbl. For the whole of 2017, inflation is expected to come in at 3.8 percent, which is close to the upper end of central bank’s target range of 3 percent to 4 percent. However, the indirect inflationary effect from higher domestic fuel prices have been restricted so far.

“We expect core inflation to stay within a 2.0-2.5 percent band for the rest of 2017, with little pressure on Bank Negara Malaysia to hike rate”, added ANZ.

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