RAM: April inflation to edge up to 1.5%

PETALING JAYA: Malaysia’s headline inflation may slightly increase to 1.5% in April from 1.3% in March, mainly attributable to the reduction in the negative growth contribution of retail fuel, said RAM Ratings.
The average price of RON95 fuel fell 0.3% on a year-on-year basis in April, compared with a 4.4% decline in March.
However, full-year inflation could recede to 2.3% in 2018 compared with the 3.7% registered last year, on the back of the newly minted government’s policies of repealing of Goods and Services Tax (GST) and maintaining fuel prices at current levels.
Assuming that there are no changes to this two policies in the second half of the year, headline inflation is expected to decline 0.7%.
“On the flipside, there may also be upside risk from marginal demand-pull inflation, given that a number of the government’s election promises are very supportive of private consumption,” said RAM’s head of research Kristina Fong.
The downside risk, on the other hand, will be on the government’s ability to zero-rate GST while maintaining retail fuel prices at current levels.
RAM also expects no further movement in Overnight Policy Rate of 3.25% for the time being, while also noting that there may be uncertainties over the outlook of the gross domestic product and inflation, pending the unveiling of other new policies.