KUALA LUMPUR: Headline inflation currently averages 2.8 per cent year-to-date and is expected to remain in the range of 1.7-1.9 per cent in the upcoming months.
Kenanga Investment Bank Bhd said this could lead to a full-year consumer price index (CPI) average of around 2.7 per cent, slightly lower than the research firm's current forecast of 2.9 per cent.
"However, the recent increase in global commodity prices, a weakened ringgit, heightened geopolitical tensions, India's ban on sugar exports, and extreme weather conditions may exert additional upward pressure on inflation in the fourth quarter (Q4) of 2023," Kenanga said in a report today.
The headline inflation edged down to a 30-month low of 1.9 per cent in September, below Kenanga's forecast and market consensus of 2.1 per cent.
It fell below its 10-year average of 2.0 per cent due to muted month-on-month (MoM) inflationary pressure in two of the largest price components, rent (18.1 per cent) and transport (14.6 per cent).
On a monthly basis, CPI slowed to 0.08 per cent from 0.15 per cent in August, partly due to deflation recorded in recreation services and culture (4.8 per cent) and health (1.9 per cent).
On the other hand, core CPI remained elevated at 2.5 per cent, above its long-term average of 1.8 per cent.
Kenanga said this component increased by 0.3 per cent MoM from 0.2 per cent in August, primarily due to rising core food prices attributed to the increasing cost of imported inflation caused by the weaker ringgit.
Further, food and non-alcoholic beverages eased 3.9 per cent in September from 4.1 per cent in August for the seventh consecutive month to its lowest level in 19 months, primarily due to continued MoM deflation in the food-at-home subcomponent.
This is driven mainly by lower prices for fresh meat, fish and seafood.
Kenanga said, however, it is worth noting that rice prices soared to 5.0 per cent year-on-year (YoY) in September from 3.0 per cent in August, its fastest pace of increase since the 2007-2008 food price crisis.
Housing, water, electricity, gas and other fuels stood at 1.6 per cent and remained unchanged at an eight-month low.
On an MoM basis, inflationary pressure was muted as a moderate increase in the maintenance and repair cost of residence was offset by lower electricity costs.
Transport recorded its second deflation in 31 months at -0.1 per cent.
"Of note, despite higher Brent crude oil price, the component continued to record zero inflation, partly due to a decline in the cost of air transport," Kenanga said.
"Even though we are currently entering a period of heightened uncertainties, Bank Negara Malaysia (BNM) is still expected to keep the overnight policy rate unchanged at 3.00 per cent until end-2024 due to a stable price outlook and a moderating growth momentum," Kenanga said.