KUALA LUMPUR (July 5): Malaysia's inflation levels are expected to moderate further between 3% to 3.5% in the second half of the year, mainly on continued moderating transport prices.

 

It had eased to 3.9% year on year in May after hitting a 8 year high of 5.1% in March, mainly thanks to moderating transport prices. The latest June figure for headline inflation has not yet been released.

 

Socio-Economic Research Centre (SERC) executive director Lee Heng Guie however said this would depend on global crude oil prices.

 

"Although headline inflation readings will moderate in the second half of the year, the pace of the price increases will depend on volatility in global crude oil prices," Lee said in a media briefing today.

 

Lee added that with higher than expected exports and better GDP growth in 1Q17 so far (5.6%), SERC had revised its GDP target to 5% for the full year (from 4.3% previously).

 

"Though it may not be as high as the first quarter, we believe it will be more moderate than the first half, underpinned by improving private and public consumption growth as well as investments," said Lee.

 

He also said he expects for Bank Negara Malaysia's Overnight Policy Rate (OPR) to be maintained at 3% this year, though added that the central bank should prepare for a potential gradual rise in interest rates in 2018.

 

SERC is an initiative by the Associated Chinese Chambers of Commerce and Industry of Malaysia. SERC operates under a separate entity SERC Sdn Bhd, which was incorporated on Oct 19, 2010.