September Inflation Report

September Inflation Report
 CPI growth inched up marginally to 3.4% yoy in Sep 2011 (Aug:
+3.3% yoy), higher than the consensus estimate of 3.3% on account
of faster annual increase in food prices (+5.0% yoy; Aug: +4.6%
yoy).
 The uptick in inflation rate was due entirely to base effect. Mom
basis, the CPI growth had remained stable at 0.2% for the third
consecutive month. However, the ongoing flood in Thailand and the
upward revision in Thai rice may cause food prices to remain high in
4Q.
 As in the past, we expect the next round of subsidy rationalisation to
be implemented in December. All-in-all, we retain our forecast that
the CPI growth will average 3.2% in 2011.
 We expect inflation to ease marginally to 3% in 2012 driven by
government’s subsidy removal exercises and the new salary scheme
for civil servants and pensioners.
 We expect BNM to hold the OPR at 3.00% until end-2012 as it
focuses on growth agenda given the recent external developments
while inflation is on moderation trend.