Malaysia’s consumer price inflation slowed in October 2017 to +3.7% year on year (yoy).

The figure was +4.3 per cent year on year in September, 2017.

Research houses including Bloomberg are chalking this to be below their forecast of +4.1 per cent.

Inflation fell 0.2 per cent month on month (mom) in October 2017 (+0.3 per cent mom in Sep'17).

Year-to-date (YTD) inflation eased to 3.9 per cent in 10M17 (+4.0 per cent yoy in 9M17) while core inflation ticked lower to 2.3 per cent yoy in Oct (+2.4 per cent in September).

The headline inflation in Oct slipped to 3.7 per cent yoy with the slow down due to food and transport prices. Annual inflation set to slow further in the November to December period.

But, fuel prices have crept up in recent weeks.

Subsidies to be expected soon?

Both Maybank and CIMB said that the Ministry of Finance (MOF) is exploring options to soften the blow of higher fuel costs for consumers if the RON95 price exceeds RM2.50/litre for consecutive three months.

The government has the fiscal room to absorb subsidies without jeopardising the budget deficit, if RON95 is capped at RM2.50/litre, until oil prices reach US$72/ per barrel.