Headline inflation likely to reach 3% in 2018

by BERNAMA / graphic by TMR

RHB Research Institute Sdn Bhd has raised its headline inflation forecast to 3% from 2.7% previously due to elevated crude oil prices and resilient domestic demand.

In a research note yesterday, RHB Research said the oil prices were expected to hold up at a stronger level this year as the commodity continued to stay elevated towards end-2017, and it would likely translate into higher fuel prices.

“Hence, we are lifting our 2018 headline inflation rate forecast to 3% this year from 2.7% previously. Nevertheless, this is still a slower pace of increase compared to the 3.7% in 2017.

“This may also likely be supported by resilient growth in domestic demand expected this year,” it said.

The headline inflation rate inched higher to 3.5% year-on-year in December 2017, mainly due to a stronger rise in food and transportation costs during the month, it said.

“For the full year, the headline inflation averaged at 3.7%, the highest in nine years, broadly in line with RHB Research’s estimate of 3.8%,” it said.

Meanwhile, RHB Research also said the monetary policy stance was expected to tilt towards the upside in 2018 as Bank Negara Malaysia would likely increase Overnight Policy Rate by 25 basis points to 3.25% in the second quarter of 2018.

“This would be in tandem with monetary policy tightening by major global central banks and with the Malaysian economy improving further.

“Furthermore, the central bank implied that it may consider reviewing the current degree of monetary accommodation given the strength of global and domestic macroeconomic conditions,” it said. — Bernama