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Prakash Sakpal, economist at ING, Malaysia’s consumer price index (CPI) inflation was back in positive territory in March, but the 0.2% year-on-year rise was smaller than the consensus median of 0.3%.

Key Quotes

“This followed two months of negative inflation; -0.7% YoY in January and -0.4% in February.”

“The seasonal post-Lunar New Year retracement of the food component, which fell 0.5% month-on-month, was a source of downside inflation surprise this time. But, barring this seasonal dip, the low base effect has started to benefit the food component in its return as the key inflation driver in the months ahead. Indeed, the 1.1% YoY rise in food was the steepest in four months.”

“Average CPI in the first three months of the year is still down 0.3% from a year ago. We maintain our 1% annual inflation forecast for 2019, which is at the low end of the central bank’s (BNM) 0.7-1.7% forecast range for this year. Persistently low inflation has brought central bank (BNM) monetary easing back on the table for the next policy meeting on 7 May, when we expect a 25 basis point cut in the overnight policy rate to 3.00%.”