Here's proof that inflationary pressure in Malaysia is building up

It's predicted to hit 1.8%.

According to DBS, Inflationary pressure is picking up. And April CPI figures out tomorrow will testify to that, with the headline number expected to print 1.8% YoY, up from 1.5% in the previous month and a mere 1.3% just three months ago. 

DBS said that they have been highlighting this since end of last year that Malaysia’s inflation will start to pick up from the second quarter onwards amid the build-up in price pressure due to the buoyant domestic growth.

And this is despite the economy having recorded the best inflation profile in 2012.

Here's more from DBS:

Plainly, inflation is likely to rise towards the 3% mark towards the end of the year (see chart). However, the argument against this is that domestic growthmomentum appears to be moderating.

Latest GDP figures show that the underlying growth momentum has eased to 4.1% YoY in 1Q13, from 6.4% previously. But as we’ve pointed out in our earlier write-up, the moderation in growth pace is largely due to a surge in import growth on the back of a strong domestic demand.

Private consumption growth in fact has picked up in the first quarter.

Nonetheless, the consideration is that investment growth and the government’s pump-priming effort is ebbing. This could have a spill-over effect on consumption and consequently on inflationary pressure.

This essentially makes for lower than expected inflation in the coming months. And that will certainly threaten our call for rate hikes by the central bank in the latter part of the year as well as the full year inflation forecast of 2.8%.

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In fact, if the slower growth momentum persists, we’ll have to par down our expectation on inflation and the policy stance.