Bank Negara Malaysia (BNM) is expected to maintain the policy rate at 3 percent throughout this year, peering through the inflation ascent.  At the same time, the still fragile balance of payments position limits the scope for rate cuts to bolster growth, ANZ Research reported.

On-year inflation climbed higher in February, owing to a 31 percent y/y average increase in domestic fuel prices and the attendant knock-on impact on transport costs. Transport costs rose 17.9 percent y/y in February, from January’s 8.3 percent.

While headline inflation is expected to spike, the magnitude of increase was larger than market expectations. During the month, core inflation, which excludes volatile items of fresh food and goods and services whose prices are administered, also firmed up to 2.5 percent y/y, from 1.8 percent y/y previously.

However, growth dynamics hardly point to the emergence of strong demand-pull inflationary pressures.