KUALA LUMPUR: RHB Research Institute Sdn Bhd expects the country’s headline inflation to moderate to 1.9% for 2018 compared with an increase of 3.7% a year earlier on lower transport costs after the government fixed fuel prices at the current rates.
The Pakatan Harapan-led government has fixed fuel prices of RON 95 at RM2.20 per litre and diesel at RM 2.18 per litre after winning the 14th General Election on May 9, 2018, whereas the RON97 price is subject to a free float.
In a statement today, economist Vincent Loo Yeong Hong said prices of goods are also likely to remain subdued following the zero-rating of the goods and services tax (GST) from June 1, 2018.
“However, this should reverse with the reintroduction of the sales and services tax (SST) of five to 10%, depending on industries, by September 2018.
“That said, consumers would still enjoy a three-month tax holiday this year that would likely dampen the inflation in 2018,” he said.
Despite expecting a lower headline inflation, Loo believed one last Bank Negara Malaysia overnight policy rate hike (up 25 basis points to 3.5%) is still on the cards this year, in line with the US Federal Reserve raising its policy rate by another 50 basis points amid continued market volatility.
“The anticipated tightening would also be a good move to fend off a potentially weaker ringgit following rising fiscal concerns.
“However, there is a risk that this may be put on hold or delayed, should the country’s economic growth slow more than expected this year,” he said. - Bernama