Nomura: CPI to rebound to 1.1pc in September

Inflation was likely kept in check by steady fuel prices and a higher base in the year-earlier period, offsetting higher food costs, economists in the survey said. (A woman shops for shoes at a mall in Kuala Lumpur, Malaysia February 7, 2018. - Reuters)

KUALA LUMPUR: Nomura Global Markets Research expects Malaysia’s Consumer Price Index (CPI) measuring headline inflation to rebound to 1.1% year-on-year in September due to the reinstatement of the sales and services tax.

It also maintained its forecast of an average 1.2% for the full year. 

It said while Bank Negara does not seem to be considering rate cuts yet, it forecasts GDP growth of 4.7% this year, undershooting Bank Negara’s 5.0% forecast and implying a slowdown in H2 to 4.5% year-on-year from 4.9% in H1, before slipping lower to 4.2% in 2019. 

“We still expect Bank Negara to leave its policy rate unchanged this year, but see a risk of it sounding increasingly cautious on growth in future monetary policy statements, and hence we do not rule out the possibility of a rate cut in 2019,” it said in a note.

CPI inflation fell to 0.2% year-on-year in August from 0.9% in July, in line with its forecast but below consensus expectations of 0.4%. 

“As we expected, this was mainly due to a base effect from fuel price hikes last year, which resulted in the transport component falling sharply to 2.1% year-on-year from 6.7% in July. 

The official measure of core inflation was broadly stable at -0.2% in August, unchanged from July.