KUALA LUMPUR: Malaysia's Consumer Price Index (CPI) cooled to 2.0 per cent in July 2023, the lowest in two years, according to the Department of Statistics Malaysia (DoSM).
The index value stood at 130.5, contrasting with the 127.9 recorded in the corresponding month of 2022.
Inflation, which came in at 2.4 per cent year-on-year in June, has shown a moderating trend since January, when it stood at 3.7 per cent.
DOSM chief statistician Datuk Seri Mohd Uzir Mahidin said the low inflation was driven by the slower increase in restaurants and hotels at 5.0 per cent against 5.4 per cent in June, and food and non-alcoholic beverages (4.4 per cent).
"This was also followed by miscellaneous goods and services (2.6 per cent) while both health and education groups increased by 2.0 per cent respectively," Mohd Uzir said in the statement.
According to Mohd Uzir, nine states recorded increases below the national inflation level of 2.0 per cent, with Wilayah Persekutuan Labuan recording the lowest increase of 1.1 per cent in July 2023.
However, six states recorded increases above the national inflation level, namely Pahang (2.6 per cent), Sarawak (2.6 per cent), Wilayah Persekutuan Putrajaya (2.6 per cent), Perak (2.4 per cent), Selangor (2.4 per cent) and Melaka (2.2 per cent), he said.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said inflation should be low in the the second half of 2023 (2H2023) owing to high base recorded in the 2H202 as well as no changes to the current subsidies especially on fuel related products.
As such, Afzanizam said the real interest rate has turned positive for three consecutive months.
"This would mean that monetary policy is no longer too easy for the economy. Perhaps, we shall expect the overnight policy rate (OPR) to be kept steady at 3.00 per cent by end of 2023," he told the New Straits Times.
Malaysia University of Science and Technology economist Dr Geoffrey Williams said inflation is continuing to slow down as predicted since January and headline inflation is at two per cent much in line with the long-term average.
Hence, a rise in the OPR next month will be unlikely, he added.
"Bank Negara will likely hold the OPR because inflation is under control and growth is weaker than expected due to external demand. The lower inflation also allows the government to move forward on subsidies reform.
"When subsidies and price controls are reduced or removed prices will rise but now inflation is lower and price hikes will be more muted. So subsidies reform can now be at the centre of 2024 Budget," he added.