Why Malaysian Inflation Declined Again in July
Consumer prices in Malaysia (EWM) grew 3.6% in June 2017, compared with its 3.9% rise in May 2017. Malaysia’s inflation as of June 2017 has been on a declining trend, after reaching its highest level in March 2017.
Inflation in June eased primarily due to a decline in fuel (USO) (UCO) prices, but oil prices have been on an uptrend since July 2017. The average gasoline price in Malaysia in June 2017 was 1.93 Malaysian ringgit (MYR) per liter, compared with 2.09 ringgit per liter in May 2017.
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Malaysian inflation in June
Inflation in June kept below market expectations of 3.9%. June saw the lowest inflation rate since January 2017, mainly due to a decline in the cost of food, non-alcoholic beverages, and transport, while inflation was steady for housing and utilities.
Core consumer prices rose 2.5% YoY in June 2017, slowing slightly from the 2.6% rise in May 2017. Consumer prices on a monthly basis have dropped for four months as of June 2017.
Economic growth in Malaysia (IEMG) is expected to improve on exports and investments in 2017. But inflation continues to be a major concern for the Malaysian Central Bank due to volatile oil prices. The recent drop in the oil prices should help keep inflation on a downtrend in 2017.
That said, headline inflation, which includes volatile items, is expected to moderate in 2H17, according to the Central Bank of Malaysia.
The Central Bank of Malaysia recently left its benchmark overnight policy rate unchanged at 3% on July 13, 2017, to support the growth momentum gained in 1Q17. The central bank expects the sustained export performance to drive Malaysia’s (VWO) economic growth for the rest of 2017.