KUALA LUMPUR: Inflationary pressure in September is expected to be modest following the reintroduction of the Sales and Service Tax, says AmBank Research.
In its morning report, it said the upside is expected to be limited from the new tax regime as compared to the Goods and Services Tax as 5,443 items have been declared exempt.
"How much prices will rise depends on how well both the manufacturers and service will be able to implement the changes as well as how much of the tax is passed on to consumers," it said.
The National Statistics Department yesterday announced that headline inflation rose at a slow pace of 0.2% in August, which brought the year-to-date average to 1.3% year-on-year.
AmBank noted that this was due to the abolition of the GST in June, "base" effects, falling tansport costs due to the slow rise of the petrol prices and the stronger ringgit on a year-on-year basis.
The research house reiterated its full-year inflation average at 1.5% with the high side of 1.8%.
It added that it expects Bank Negara Malaysia to maintain the current 3.25% overnight policy rate.
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