Inflation Trends Downward In October Amid Lower Food Costs

Economic Research	25 November 2016
Malaysia
Economic Highlights
Inflation Trends Downward In October Amid Lower Food Costs The headline inflation rate inched lower to 1.4% y-o-y in October, from +1.5% registered in the previous two months, reflecting the easing in the cost of food and beverages. The core inflation rate also inched lower during the month. Overall, prices remained subdued on the back of weak demand and still low fuel prices and despite the adjustments in administered prices and higher prices of imported goods due to the weak ringgit exchange rate. Looking ahead, we envisage the headline inflation rate to remain manageable at 2.5% in 2017, up from +2.0% estimated for 2016. Given rising currency volatility, we believe there is a strong likelihood for the Central Bank to be cautious and keep the OPR unchanged at 3.00% in 2017. Having said that, there is room for a further rate cut should growth fall below expectation in 2017 and if the ringgit stabilises at a stronger level. Economist:  Vincent Loo Yeong Hong  | +603 9280 2172