KUALA LUMPUR: Malaysian Rating Corporation Bhd (MARC) sees higher inflation ahead, fuelled by rising costs of food and fuel, and has raised its forecast for the average inflation rate of 5.8% for this year from the previous estimate of 5%.
The rating agency said on Friday that sharp increases in the sub-indices of transport and food and non-alcoholic beverages by 19.6% and 10% year-on-year were are expected to continue until year-end.
The factors for the rising inflationary pressure in the remaining part of the year would result from the fallout from rising cost of food and fuel.
While the consumer price index (CPI) has risen by an average rate of 3.7% in the first half, the CPI is expected to climb at a faster pace of 7.9% in the 2H2008, giving an average of 5.8% for the whole year.
MARC said the two major sub-indices, that would exert upward pressures on the overall CPI in the near term, would be food/non-alcoholic beverages and transport.
It added the higher-than-expected inflation in Malaysia and in the region as well as major developed countries in recent months; it expected an increasing risk of higher overnight policy rate (OPR) from the 3.5% now.
It said should the economy continue to post a higher-than-expected growth which would lead to a continuous rise in capacity utilisation of the manufacturing sector as well as emergence of demand-pull factors in the economy, a monetary policy response was expected in the near future.