Malaysia: Inflation retreated further in October – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the recent publication of inflation figures in Malaysia.

Key Takeaways

Headline inflation moderated for the second straight month to 1.8% y/y in Oct (from +1.9% in Sep), matching our estimate but coming a tad lower than Bloomberg consensus’ 1.9%. It also marked the lowest inflation rate since Mar 2021, largely due to a further moderation in food price inflation and steady fuel pump prices. This helped to cushion the impact from an uptick in prices of four other components - health, recreation services & culture, education as well as restaurants & hotels. 

We trim our 2023 full-year inflation forecast to 2.5% as year-to-date headline inflation (averaged at 2.7%) has fallen below our previous projection of 2.8%. Additionally, there are no price hike proposals planned for the two remaining reporting months of this year, suggesting that headline inflation will likely continue its downtrend to ~1.7% for the final two months of the year. This downshift in the inflation trajectory has also resulted in an adjustment to our full-year inflation forecast for 2024 to 2.6% (from 2.8% previously), which has factored in the impact of the 2% hike in service tax from Mar 2024 but not the effects of other domestic price policy changes particularly the subsidy rationalization and progressive wage mechanism.