Petrol price hike poised to 'fuel up' Oct headline inflation

KUALA LUMPUR: Headline inflation will be higher in October, led by the hike in fuel prices, said economists.

The consumer price index is expected to rise by an average 2.72 per cent year-on-year.

The Statistics Department will be releasing the data today.

HSBC Bank said base year effects, arising from the 10-11 per cent hike in subsidised fuel prices in September, will likely keep the reading on October CPI at 2.6 per cent, which will still place it within Bank Negara Malaysia's comfort range.


Excluding food and fuel prices, core inflation is also set to remain stable at 1.3 per cent year-on-year.Irvin Seah of DBS Bank said the recent spike in inflation is largely policy-driven.

The government cut both RON 95 petrol and diesel subsidies by RM0.20 per litre. This raised the pump prices for RON95 petrol to RM2.10/litre and diesel to RM2/litre, up from RM1.90 and RM1.80, respectively.

"While that will save about RM3.3 billion per year for the government, the inflationary effect has been manifested in the headline inflation number."

Seah said the days of strong growth and low inflation are coming to an end.

He said there is also little justification for Bank Negara to start tightening monetary policy as the growth momentum is already slowing on easing domestic demand, while the inflationary impact of policy changes will be transient.(Business Times)