KUALA LUMPUR: Malaysia's headline inflation declined to 3.9 per cent from April's 4.4 per cent.
In a statement today, Bank Negara Malaysia attributed this decrease in inflation to lower fuel prices in May, saying that prices of RON95 petrol averaged lower at RM2.09 per litre in May compared to RM2.21 per litre in April.
Additionally, it said that with global oil prices trending lower in June, domestic fuel prices also averaged lower in June.
On another note, the central bank also observed that continued inflows into the domestic financial market had led to the ringgit's appreciation.
"Non-resident inflows into the government bond market amounted to RM9 billion in May, a second consecutive month of inflows. The inflows reflect positive developments arising from measures to develop the domestic financial market.
"As a result, the 3-year, 5-year and 10-year MGS yields declined by 4, 13 and 17 basis points respectively," BNM wrote in its monthly highlights report for May 2017.
The equity market also continued to receive non-resident inflows in May, to the tune of RM2 billion, with sentiments supported by the stronger-than-expected GDP growth in 1Q 2017 and improved ringgit outlook.
"A sell-off towards the end of the month, however, led to the FBM KLCI declining marginally by 0.1 per cent," it said.
"The continued non-resident inflows totalling RM12.1 billion into the Malaysian financial market resulted in the ringgit remaining as the best performer in the region in May, appreciating by 1.7 per cent against the US dollar," BNM wrote.
The nation's banking system also has sufficient liquidity in the banking system.
"Liquidity in the banking system remains supportive of banks’ financing activities. Aggregate surplus liquidity placed with Bank Negara Malaysia stands at RM179.2 billion.
"All banks also maintained Liquidity Coverage Ratios above the regulatory requirement to meet unexpected cash outflows or adverse liquidity shocks," the central bank reported.