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UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting reviewed the recent inflation figures in Malaysia.

Key Quotes

“Consumer price index (CPI) fell by the same pace of 2.9% y/y in May (Apr: -2.9% y/y), marking the third month of deflation during the Movement Control Order (MCO).”

“Further declines were recorded in prices of transport, utilities, clothing and footwear, and nonessential items especially household-related products and services. To note, the government has removed the fuel price ceiling that caps the price of RON95 and diesel, and announced additional electricity discounts for Apr-Sep.”

“The reopening of the domestic economy and allowing of interstate travel has resulted in higher mobility levels of Malaysians, easing of supply disruptions and demand recovery. Core CPI rose 1.1% y/y despite the decline in headline CPI signalling sustained underlying demand particularly for essential goods and services. Headline inflation is expected to average -0.5% in 2020 (BNM forecast: -1.5% to +0.5%) with volatile global oil prices being a wildcard. We expect the Overnight Policy Rate to be kept at 2.00% in the coming monetary policy meeting on 6-7 July.”