Pump price hike will push inflation to 2.2%, says RHB Research


It also said there was a likelihood that the government may implement the goods & services tax (GST) that could add further pressure to inflation in 2015.


Malaysia’s move to raise pump prices for petrol and diesel will push the inflation rate further to 2.2% from the current 2%, RHB Research Institute said in a report today.

It said given that the weights for petrol and diesel account for about 7.5% and 0.2% respectively of the consumer price index (CPI), the 20 sen increase in fuel prices were likely to contribute to a one-off increase of 0.78 and 0.02 percentage points to the CPI in September.

However, the research house opined that the effects to consumers would be muted.

“As in the past, the impact on inflation is expected to be one-off and the pass through effect is not likely to be strong, in our view. Consequently, we expect inflation rate to jump from our earlier forecast of +2.1% y-o-y in September to +3.0%,” it said in the report.

The inflation rate was expected to trend up and reach a high of +3.5% in December, before tapering off, it said.

The research house has upped its CPI projection  for 2013 to an estimate of +2.2% compared to an earlier projection of +2%.

Potentially, the government could raise the fuel prices again six to nine months down the road and twice for 2014.

The move, if it materialises, could push inflation higher to around +3.2% in 2014 compares with its  current projection of +2.2%.