Malaysia's June inflation rate falls to 1.6pc (By NST)

KUALA LUMPUR: The Consumer Price Index (CPI) in Malaysia fell further to 1.6 per cent in June from 1.7 per cent in May.

The growth, in keeping with market expectations, is expected to pick up with the coming Ramadan festivities, say economists.

According to the Statistics Department, the CPI for the six months rose by two per cent to 104.6 compared with 102.5 in the same period last year. Compared with May, it increased by 0.1 per cent.

Bank of America Merrill Lynch economist Dr Chua Hak Bin said the higher month-on-month increases in food (0.6 per cent) were offset by falls in transport (-0.3 per cent), clothing/footwear (-0.2 per cent), communication (-0.1 per cent) and education (-0.1 per cent).

"Food prices might continue to creep higher in anticipation of the upcoming fasting month, which starts in late July," he said.

The research house has lowered the CPI forecast to two per cent (from 2.6 per cent) in 2012 and 2.5 per cent (from three per cent) in 2013, given the tame inflation readings.

Inflation has been sliding lower since the start of the year, while holding subsidised fuel prices constant has sheltered transport costs from volatile global oil prices.

Housing, utilities and fuels, which account for 22.6 per cent weight in the CPI basket, has also been contained, helped in part by price controls.

Chua expects Bank Negara Malaysia to maintain its benchmark policy interest rate at three per cent at the next monetary policy meeting on September 6 and for the rest of the year.

"Inflation remains tame while growth is well supported by resilient domestic demand," he said.

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