Malaysian headline inflation likely to have slowed down slightly in September

Malaysian inflation data for September is set to release tomorrow. According to a DBS Bank research report, the consumer price inflation is expected to have slowed down a bit to 1.4 percent year-on-year from 1.5 percent seen in the prior month. However, prices have remained fairly stable, and inflation is expected to stay in range bound between 1.5 percent and 2 percent in the months ahead.

As effects from the post-election policy changes fade from June onwards, inflation has reverted to a more normalized path. This might permit the central bank to shift its attention towards growth. Although GDP growth has accelerated in the second quarter of 2019, that came largely because of a one-off tax refund for consumers and low base in the same period last year.

“We expect growth momentum to ease in the coming months and this is where we think there is room for monetary policy to turn a bit more accommodative. We continue to expect Bank Negara to lower the Overnight Policy Rate by 25bps in the coming months”, added DBS Bank.