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Malaysia's Aug CPI gains 0.2% on rising food, drinks prices [20-09-2012]  
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The inflation rate as measured by the consumer price index (CPI) rose 1.4% year-on-year in August while prices gained a marginal 0.2% month-on-month due to to higher prices for food and non-alcoholic beverages.

The Statistics Department, which released the data, said prices from January to August increased by 1.8% compared with the previous corresponding period.

It said prices for August increased compared with a year earlier due to food and non-alcoholic beverages, which rose 2.8% and non-food items, which gained 0.7%.

Compared with July, the CPI for August rose 0.2% due to increases in main groups housing, water, electricity, gas and other fuels (+0.5%); transport (+0.3%); food and non-alcoholic beverages and furnishings 0.2%; alcoholic beverages and tobacco and health by 0.1% respectively

The department said the CPI for January to August rose 1.8% to 104.6 from 102.8 a year ago due to food and non-alcoholic beverages and non-food. They increased by 3.0% and 1.2% respectively.

Compared with the previous month, the index for food and non-alcoholic beverages and non-food increased by 0.2% respectively.

MIDF Research economist Anthony Dass said while the core-CPI eased further, some pressure was seen in food and non-alcoholic beverages.

“Given the benign inflationary trend, it has opened the door wider for Bank Negara to re-price its policy rate now at 3%. However, we believe Bank Negara is unlikely to re-price its policy rate throughout this year. We feel Bank Negara needs greater level of conviction, especially with the economy performing well in the first half, having grown by 5.2% year-on-year, driven by the strong domestic demand,” he said in a report.

Dass viewed that the prices of food could inch up slightly in the coming months. He said with the quantitative easing 3 in place, it should exert some levels of upward pressure on global commodities prices. Also, with the festive seasons in fourth quarter, it should also add some pressure on food as well as non-alcoholic beverages prices. Adding on, prices could inch up should there be “supply disruptions” due to natural disasters and or bad weather, Dass said.

“We are of the view that the core-CPI is unlikely to increase in the remaining months of 2012. This is because we believe that there will not be any further relaxation to the subsidies like fuel prices anytime soon. Another contributory factor is the high base,” he said.

Meanwhile, RHB Research Institute Sdn Bhd expects inflation to remain benign in the near term, going forward. However, it said a moderate increase in price pressure could gradually build up towards the end of the year and in the beginning of next year, on the back of rising commodity prices caused by draught in some part of the United States and as the economic growth gains momentum in 2013. “As a whole, inflation is projected to inch up to around 2.0% in 2013, from an average of 1.6% estimated for 2012.”

“Despite anticipation of higher inflation in 2013, it will likely remain manageable and unlikely pose a threat to the economy. As a whole, the central bank, in our view, will likely keep its overnight policy rate unchanged at 3% next year, after maintaining it at the same level for the rest of this year,” RHB said.

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