RHB | Malaysia | Inflation Eased To 3.2% Y-o-Y In July, BNM Will Unlikely Rush To Hike Rates, 21 Aug 2014

Economic Research	21 August 2014
Malaysia
Economic Highlights
Inflation Eased To 3.2% Y-o-Y In July, BNM Will Unlikely Rush To Hike Rates The headline inflation rate eased to 3.2% y-o-y in July, from +3.3% in the previous month and compared with 3.2% in May, as the effect of the upward adjustment in administrative pricing is gradually fading, while the Ramadhan and Raya festivities did not exert much upward pressure on prices during the month. The stronger-than-expected GDP growth in the 2Q is putting pressure on the Central Bank to adjust its degree of monetary accommodation again and some economists expect it to raise the OPR by another 25 basis points for the rest of this year. We believe otherwise and expect the OPR to be kept at 3.25% for the rest of the year, as there is no urgency for the Central Bank to be aggressive in its monetary policy tightening given that the country’s domestic demand is heading south, external economic environment is still fraught with challenges and downside risks and the US Federal Reserve will unlikely raise its interest rates anytime soon. Economist:  Peck Boon Soon  | +603 9280 2163 Economist:  Shafizal Shafaai  | +603 9280 2179