Inflationary pressures set to ease further

KUALA LUMPUR: Inflationary pressures in Malaysia are expected to ease further in March on lower food prices after the festivities in February.



A Business Times poll expects the Consumer Price Index to post a 2.16 per cent growth in March from 2.2 per cent.

The Statistics Department will release the data today.

Standard Chartered Bank economist Jeff Ng expects headline inflation to fall for a fifth consecutive month.

"Inflation was temporarily suppressed by the easing cycle in food prices, which constitutes the bulk of price rises," he said in a report.

Upside risks of energy price inflation also receded in recent weeks.

Ng said inflation rates should be constrained by a favourable base effect and limited price pressures as the government maintains subsidies ahead of expected elections.

"We expect low inflation rates for now, but watch for higher inflation in the coming months as a result of proposed government policies, such as the implementation of a minimum wage."

US investment bank CITI also expects the March data to continue to moderate, partly on base effects.

Growth is expected to be flat month-on-month from February.

"The softening external outlook has likely reduced demand pull inflation pressures, though not eliminated them completely as the rebound in core inflation (excluding food and transport) in February proved."

Bank of America Merrill Lynch, however, expects consumer prices to bounce back slightly in March from February, where prices fell back because of the fall in food prices after the Chinese New Year festivities.

Subsidised fuel prices have been kept on hold, shielding the impact of higher global oil prices on inflation.

The Malaysian Institute of Economic Research in its latest briefing yesterday, said inflation could stay below the 2.5 per cent level for the rest of the year.

"This is barring a sustained rise in global oil prices and severe food supply disruptions because of bad weather," said executive director Dr Zakariah Abdul Rashid.

The think tank expects Bank Negara to keep interest rates at current levels for the rest of the year to stimulate growth in the subdued global economic climate.