CIMB Securities lowered its 2024 inflation forecast from 2.3% to 1.9%.
PETALING JAYA: Headline inflation is expected to remain low for the rest of 2024, with higher inflation risks anticipated in 2025.
According to economists, the consumer price index (CPI) growth, a gauge of inflation, would likely stay around 2% for the remaining months of this year before rising on account of further subsidy rationalisation and other upcoming reform measures.
CIMB Securities yesterday lowered its 2024 inflation forecast from 2.3% to 1.9%, citing muted price pressure amid the ringgit’s appreciation and moderating crude oil prices.
“We expect the inflation rate to stay benign in the coming months, as the ringgit’s appreciation and moderating global crude oil prices alleviate imported cost pressures on businesses and mitigate the impact of the lower base effect,” the brokerage said.
The Statistics Department revealed on Monday that CPI growth had moderated to a four-month low of 1.9% last month.
For the eight months to August 2024, CPI growth averaged at 1.8%.
CIMB Securities, however, noted that the government’s commitment to subsidy rationalisation biases inflation risk to the upside in 2025.
“Budget 2025, scheduled to be tabled on Oct 18, may offer some clues on subsequent subsidy rationalisation plans for various items, including the extension of targeted diesel subsidies to Sabah and Sarawak, the RON95 petrol subsidy rationalisation and new sugar price mechanisms, among others,” it explained.
TA Research said the inflation rate for September would likely remain manageable at around the long-term average of 2%, barring any adjustments to fuel prices, especially for RON95 petrol.
“As for now, we expect the CPI to stay within the 2.5% to 3% range, with a midpoint of 2.7%,” it said.
“If the anticipated removal of the RON95 subsidy materialises in the final quarter, monthly CPI changes could reach the 3% level, potentially causing ripple effects throughout the economy.
“However, if the RON95 subsidy rationalisation is postponed until next year, the average CPI for this year could be significantly lower, likely around 2%,” it explained.
TA Research further noted that Bank Negara previously indicated that for the year, overall, both average headline and core inflation were expected to remain within the projected ranges and were unlikely to exceed 3%.
Maybank Investment Bank (Maybank IB) Research maintained its 2024 and 2025 inflation forecast at 2% and 2.5% to 3%, respectively, amid the uncertain timing, quantum and mechanics of the RON95 subsidy rationalisation.
“With the mild inflation effect from the services tax adjustment and diesel subsidy rationalisation, plus the likely ‘no show’ of RON95 subsidy rationalisation this year, we maintain our full-year 2024 inflation forecast at 2%.
“This assumes that the blanket RON95 petrol subsidy holds and its price remains at RM2.05 per litre for the rest of the year,” it explained.
“For 2025, we maintain our 2.5% to 3% range inflation on the back of the uncertain timing, quantum and mechanics of RON95 subsidy rationalisation, which we assume will take place next year,” it added.
Meanwhile, Hong Leong Investment Bank Research cut its 2024 CPI forecast to 1.9% from the previous 2.6%, given the absence of further fuel subsidy reform updates.
The brokerage said inflation thus far had remained subdued, as mitigation measures and lower global oil prices have muted the overall impact on CPI.
