Inflation to remain bottomed out for Malaysia

Analysts expect inflation to hit 1.5-1.8% in the next months before reaching 2% by end-2012.

According to DBS, CPI inflation figure for Sep12 due this week will continue to show benign inflationary pressure within the economy. The headline number will likely register 1.4% YoY, unchanged from the previous month.

Here's more from DBS:

In fact, inflation has bottomed and will remain range-bound between 1.5-1.8% in the coming months before inching towards 2.0% by the end of the year.

Going forward, imported inflationary pressure will remain low due to the sluggish economic conditions. Even the recent supply side disruptions due to crop failures in some parts of the world will not seriously impact domestic price pressure due to Malaysia’s price stability programme.

Furthermore, global economic landscape doesn’t change overnight. Apart from the small pocket of risks from global food prices, slow global growth essentially guarantees benign imported inflation.

Indeed, inflation would have been even lower if not for the buoyant domestic economic conditions. In this regards, monetary policy is expected to remain on hold till mid next year.