KUALA LUMPUR: RAM Ratings expects the August 2017 inflation rate to increase to 3.8 per cent, following four consecutive months of declines. The faster pace of growth in consumer prices is underpinned by higher retail petrol prices, which averaged RM2.12/litre in August (compared to RM1.96 in July) and amid strengthening global crude oil prices, it said in a statement today. “This will, in turn, raise the transport component’s contribution to overall inflation in August. “While the food component is envisaged to remain a key contributor of headline inflation, it is expected to slip slightly, relative to earlier months as demand has moderated after the Hari Raya festive period,” it said. RAM Ratings has maintained its projected headline inflation at 3.8 per cent for 2017.
“Overall consumer prices are envisaged to increase at a slower pace in the second half of 2017, given the expected moderation in contribution by the transport component as the low-base effects dissipate. “With the better-than-expected gross domestic product numbers for the first half of 2017 and stronger potential for demand-pull inflation to become a more prominent feature in the future, we believe there is more room for a 25-basis points hike in the overnight policy rate if the current growth momentum is maintained,” it added. RAM Ratings said disruptions in oil production will be pivotal to the trajectory of domestic consumer prices. It said the disrupted output and supply in Libya and the United States last month, will likely shore up global oil prices in the following weeks. “As consumer fuel prices now closely track global oil prices, such supply disruptions will likely feed into domestic consumer price trends,” it added.
