SEARCH

RAM Ratings sees Jan inflation rising to 1.8%

20 Feb 2020 / 18:19 H.

PETALING JAYA: RAM Ratings expects the overall inflation rate to increase to 1.8% in January, from 1% seen in December 2019, underpinned by higher transport fuel inflation amid the low-base effects on retail fuel prices.

In a statement, the ratings agency noted that the average price of RON95 petrol rose 4.9% year on year in January 2020, in contrast to the 5.5% contraction last month.

It also pointed out that while the duration and severity of the Covid-19 pandemic remains uncertain, it has already depressed world oil prices as China is the second largest source of global demand.

“That said, our base line assumption for Brent crude prices to average around US$55-US$60 per barrel this year still holds, albeit with a downside skew given the current dampened state of economic affairs.

“However, if Brent crude were to hover around US$50/barrel through the whole of 2020, headline inflation could fall to 1.2%, from our current forecast of 1.7% in 2020,” it said.

RAM Ratings said it expects Bank Negara Malaysia to cut the Overnight Policy Rate again in the next six months to 2.50% for the year, given the significant risk that the Covid-19 pandemic poses to economic growth.

It added that the cut would provide some respite and greatly assist businesses during this period of uncertainty and economic stress.

“In the same vein, the targeted fuel subsidies programme, which would have floated consumer fuel prices to market levels, may also be put on the back burner to sustain household spending.

“The downtrend of global oil prices provides some leeway for the delay without compromising fiscal spending,” it added.

email blast