Malaysia: Inflation slows the pace in January – UOB

0

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting reviewed the latest inflation figures in the Malaysian economy.

Key Quotes

“Consumer price index (CPI) picked up to 1.6% y/y in Jan (Dec 2019: +1.0% y/y), marking a 20- month high amid low base effects and costlier fuel and transport prices compared to a year ago. However, it came in lower than our estimate (1.8%) and Bloomberg consensus (1.7%).”

“Despite the uptrend in Jan’s inflation, the COVID-19 outbreak is expected to exert downward pressure on prices given lower fuel costs and transport prices particularly for bus and airfares. Softer demand pressures will also keep inflation on the back burner. As such, we lower our 2020 full-year inflation forecast to 1.5% from 2.5% previously (MOF forecast: 2.0%).”

“Our downward revision of CPI growth target factors in lower transport inflation as (i) the government has postponed its plan to float fuel prices, and (ii) PLUS toll rates were reduced by 18% from 1 Feb. The potential pass-through from the MYR1,200 minimum wage and a planned water tariffs hike nationwide may also be delayed amid the COVID-19 outbreak. Hefty price discounts may also be seen in tourism-related sectors to mitigate the impact of the outbreak.”

“We expect the impact of the COVID-19 outbreak to be temporary and assume a rebound by 2H20. The government will be announcing a targeted fiscal stimulus package on 27 Feb to cushion the downside risks from the COVID-19 outbreak particularly for the hardest-hit sectors. Bank Negara Malaysia (BNM) has delivered two 25bps rate cuts since May last year to support growth. Hence, we expect policy rates to stay on hold for now as BNM continues to monitor the situation.”

Get the 5 most predictable currency pairs

About Author

Comments are closed.