KUALA LUMPUR: Inflation rate for full year 2017 is expected to inch down lower to 3.8 per cent from four percent, despite continuing downtrend in fourth quarter 2017’s consumer price index (CPI), said JF Apex Securities.
JF apex said this is due to recovery in commodity prices and strengthening of ringgit.
“Besides that, we also reckon that BNM (Bank Negara Malaysia) will increase OPR (overnight policy rate) by 25 basis points in 2018 in view of strong economic growth and manageable inflation rate,” it said.
CPI in November 2017 recorded a slower growth of 3.4 per cent from 3.7 per cent recorded in October.
JF Apex said the result was below its in-house expectation of 3.6 per cent but within consensus of 3.4 per cent.
Meanwhile, Hong Leong Investment Bank (HLIB) Research said it expects domestic demand-led inflation to be contained, consistent with moderation in core inflation.
However, it said the robust export sector may have strong spillover on domestic demand which could feed to sustained core inflation in 2018.
“Despite the moderation in inflation, we opine that BNM has turned its attention to the prolonged period of negative real interest rate (10th consecutive month) and signs of property imbalances should policy rates remain overly accommodative,” it said.
HLIB said while BNM is expected to normalise the interest rate by 25 basis points as early as January 2018, it did not expect BNM to start a rate hike cycle as inflation is expected to moderate into 2018 while oil prices remain range-bound,” it said.