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KUALA LUMPUR, RHB Investment Bank Bhd (RHB IB) has revised its 2024 headline inflation projection downward to 2.1 per cent from a previous 2.6 per cent forecast.
It expects core inflation to average 2.0 per cent in 2024, the research bank said in a note today.
‘This revision is based on the muted impact of diesel price adjustments and utility tariff changes on headline inflation, the delay in RON95 petrol subsidy rationalisation until the end of 2024 (at the earliest), and slower-than-expected inflation on a year-to-date basis,’ said RHB IB.
It said inflation pressure remains manageable, with headline inflation rising by 1.8 year-on-year (yoy) for the first seven months, compared to its earlier projection of 2.1 per cent yoy for the same period.
‘Additionally, our previous projection accounted for a potential upside in the headline consumer price index from a revision in services tax, with an expected impact of 0.3 per cent – 0.6 per cent.
‘At this point, the effect of services tax adjustments on headli
ne inflation has been minimal, with no significant upsides observed since its implementation on March 1.
‘Thus, we expect headline inflation to remain stable at 2 per cent to 2.3 per cent yoy for the remainder of the year, assuming a delay in RON95 fuel price adjustments,’ it said.
RHB IB said the inflation trajectory will hinge on the RON95 subsidy rationalisation timeline and its quantum of price adjustment, potential demand upsides from partial pension fund withdrawals and the spill-over impact from higher global commodity and food prices.
‘A planned increase in civil servant salaries (effective December 2024) could also increase demand-pull inflation pressure.
‘We will remain attentive to any potential fiscal consolidation measures (including details on RON95 subsidy retargeting) announced during the Budget 2025 tabling, scheduled on Oct 18,’ it added.
RHB IB said the government may assess the lagged impact of diesel price adjustments and other fiscal measures, such as revisions in services tax and u
tility tariffs, on the inflation trajectory and economy before implementing RON95 petrol subsidy rationalisation.
Source: BERNAMA News Agency
