PETALING JAYA: The consumer price index (CPI) accelerated by 3.3% year-on-year in August, on higher prices for miscellaneous goods and services, recreation services and culture as well as housing, water, electricity, gas and other fuels.
According to the Statistics Department, the CPI for the first eight months of this year increased by 3.1% to 102.8 (compared with 99.7 in the same period last year).
When compared with July, the CPI in August increased by 0.2%.
Economists noted that this was in line with their view that inflation peaked at 3.5% year-on-year in June, before moderating slightly to 3.4% in July.
A Credit Suisse report estimated that inflation was flat in August on a seasonally adjusted basis.
“We expect year-on-year inflation to hover around 3.3% to 3.4% in the next few months before slowing to 3.2% by end-2011,” said Credit Suisse.
The report said inflation was likely to fall below 3% in the first half of next year, and could fall more rapidly than expected if the global growth outlook worsened.
Credit Suisse also noted that there could be a risk of a higher inflation rate due to the ringgit which has depreciated by over 5% against the US dollar since early September.
“It is too early to adjust our inflation forecasts at this stage. History suggests that it takes much bigger foreign exchange moves than we have seen so far to have a meaningful impact on Malaysian inflation,” said Credit Suisse.
However, Barclays Capital maintained its view that the ringgit would appreciate to RM2.90 in six months and RM2.84 in 12 months against the US dollar.
“We see several signs that elections may be brought forward and could be held well before the end of the year. We believe this would be a catalyst for the ringgit's strength,” Barclays Capital said in a note.
Barclays Capital also pointed out that risks to food prices were biased on the upside in the near term.
“Recent flooding in northern Malaysia, particularly in Perlis, is likely to weigh on rice and other food production, which could keep pressure on food prices in the near term,” it said.
Barclays Capital also pointed out that the contribution of non-food inflation remained sticky.
“The stickiness in non-food prices is largely due to persistent increases in recreation, health and miscellaneous services,” it said.
Bank Islam Malaysia Bhd chief economist Azrul Azwar said the CPI should continue to ease further until next year due to reduced pressure from food and fuel inflation.
“The balance of risks has tilted towards concerns about slower economic growth rather than uncontrolled inflation,” Azrul said.
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