Malaysia Consumer Price Index up 1.6pc in May
THE Consumer Price Index (CPI) rose 1.6 per cent last month in line with market expectations.
The index increased to 113.5 from 111.7, led by a rise in the index for food and non-alcoholic beverages and non-food, the Statistics Department said. Compared to April, the CPI was up 0.3 per cent.
Economists are expecting the benign levels to remain throughout the year in the absence of any major subsidy scheme revamp.
In the first five months of the year, the CPI was up 1.4 per cent to 113.3 from 111.7 in the same period last year, with food as a notable weight.
Citi economist Kit Wei Zheng said that prices of food/beverages, constituting almost a third of the CPI basket, rose in both year-on-year and month-on-month terms.
Transport costs rose due to low base effects. Higher transport prices likely have priced in higher fuel costs versus a year ago (when Malaysia shifted to a two-tier retail pricing system for subsidised petrol to reduce the subsidy bill).
Citi still maintains its 2 per cent inflation forecast for Malaysia for this year.
"Upside risks from subsidy reforms may have subsided," it said.
Following Subsidy Open Lab Day to garner public opinion on subsidy cuts, the Domestic Trade and Consumer Affairs Minister said that subsidies will not be cut anytime soon.
"While we do not rule out the possibility of subsidy cuts in the Budget, populist pressures suggest that the likelihood of inaction for the year remains high.
"Instead, it is possible that subsidies may be cut only after early elections (which are not due till 2013) are called, possibly in 2011," said Citi.
Citi also expressed doubts that Bank Negara Malaysia will respond to supply-side driven price pressures unless headline inflation exceeds 3 per cent and is judged to be mainly demand-pull driven.
"We expect demand-pull inflationary pressures to remain muted in the near term despite the brighter gross domestic product outlook as output is not likely to be significantly above potential this year."
The index increased to 113.5 from 111.7, led by a rise in the index for food and non-alcoholic beverages and non-food, the Statistics Department said. Compared to April, the CPI was up 0.3 per cent.
Economists are expecting the benign levels to remain throughout the year in the absence of any major subsidy scheme revamp.In the first five months of the year, the CPI was up 1.4 per cent to 113.3 from 111.7 in the same period last year, with food as a notable weight.
Citi economist Kit Wei Zheng said that prices of food/beverages, constituting almost a third of the CPI basket, rose in both year-on-year and month-on-month terms.
Transport costs rose due to low base effects. Higher transport prices likely have priced in higher fuel costs versus a year ago (when Malaysia shifted to a two-tier retail pricing system for subsidised petrol to reduce the subsidy bill).
Citi still maintains its 2 per cent inflation forecast for Malaysia for this year.
"Upside risks from subsidy reforms may have subsided," it said.
Following Subsidy Open Lab Day to garner public opinion on subsidy cuts, the Domestic Trade and Consumer Affairs Minister said that subsidies will not be cut anytime soon.
"While we do not rule out the possibility of subsidy cuts in the Budget, populist pressures suggest that the likelihood of inaction for the year remains high.
"Instead, it is possible that subsidies may be cut only after early elections (which are not due till 2013) are called, possibly in 2011," said Citi.
Citi also expressed doubts that Bank Negara Malaysia will respond to supply-side driven price pressures unless headline inflation exceeds 3 per cent and is judged to be mainly demand-pull driven.
"We expect demand-pull inflationary pressures to remain muted in the near term despite the brighter gross domestic product outlook as output is not likely to be significantly above potential this year."
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