KUALA LUMPUR: Malaysia's inflation rate is expected to stay benign in the coming months, CIMB Securities said.
The ringgit appreciation and moderating global crude oil prices will alleviate imported cost pressures on businesses and mitigate the impact of the lower base effect, it added.
CIMB Securities has revised its 2024 inflation forecast from 2.3 per cent to 1.9 per cent, after headline inflation averaged 1.8 per cent year-on-year (YoY) in the first eight months of 2024 (8M24).
The firm noted that diesel retail price in Peninsular Malaysia, which was floated on June 10 this year, has been subject to several rounds of downward adjustment since Aug 8.
This is by a cumulative of 40 sen per litre to RM2.95 per litre currently, in the weekly review of retail fuel prices.
"This was also followed by RON97 petrol since Aug 29, which has seen a cumulative decline in the retail price by 28 sen per litre to RM3.19 per litre currently.
"As such, the diesel index is poised to fall further in September after recording a 1.2 per cent decline month-on-month (MoM) in August."
CIMB Securities estimated that the unit subsidy RON95 petrol has decreased from RM1.10 per litre as of end-June 2024 to around 70 sen per litre currently, significantly alleviating the pressure on the budget.
It said the development buys some time for the government, which aims to utilise the Central Database Hub (Padu) database for targeted RON95 subsidy mechanism to mitigate the impact on the vulnerable segments and minimise the risk of policy reversal.
On that note, the firm said the upcoming 2025 Budget, scheduled to be tabled on Oct 18, may offer some clues on subsequent subsidy rationalisation plans for various items.
This includes the extension of targeted diesel subsidies to Sabah and Sarawak, RON95 petrol subsidy rationalisation and new sugar price mechanism.
CIMB Securities also noted that the economic growth momentum is poised to stay buoyant after the solid performance of 5.1 per cent in the first half of 2024 (1H24), underpinned by strong domestic demand and export recovery.
"In view of upside inflation risk and a positive economic growth outlook, we expect Bank Negara Malaysia to maintain the overnight policy rate at 3.00 per cent in 2024 and 2025," it said.