Malaysia's July Inflation To Ease To 3.2 Pct On Lower Fuel Prices - RAM

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KUALA LUMPUR -- RAM Rating Services Bhd expects Malaysia’s inflation to ease for the fourth consecutive month, falling to 3.2 per cent in July 2017 after slipping to 3.6 per cent in the preceding month.

In a statement today, the rating agency said the projection was premised on the continued moderation in fuel inflationary pressures amid lower retail fuel prices during the month, in tandem with the dissipation of the low-base effect. 

"The average retail price of RON95 declined to RM1.96 per litre in July, breaching the year’s previous low of RM2.00 per litre in June, and consequently reducing the contribution of the transport component to headline inflation," it added.

RAM said it maintained its projected headline inflation at 3.8 per cent for 2017 and expects food and transport fuel to remain as key drivers of overall price growth this year.

It also said the overall inflation rate was particularly high in the first half of the year (1H17), with an average rate of 4.1 per cent, the highest half-year figure since the second half of 2008. 

It said this was primarily driven by elevated food prices and a recovery in fuel prices.

“Nevertheless, we expect inflationary pressure on the transport fuel component to weaken as stronger fuel price growth and the low-base effect contribution, which had shored up headline inflation in 1H17, recede,” it said.

The rating firm also believes there is room for a 25-basis points hike in the overnight policy rate towards the end of this year.