Inflationary pressure to ease by year-end

Economist Yeah Kim Leng says pegging fuel prices will likely cushion any inflationary pressure until the government decides to change the policy.

The government has allocated RM3 billion to subsidise fuel prices until year-end. (AFP pic)

KUALA LUMPUR: Inflationary pressure is likely to trend downwards in the remaining months of 2018, mainly driven by the price of fuel which will no longer be floated on a weekly basis.

Yeah Kim Leng, from Sunway University’s Business School, said the measure which was introduced in May by the new government would cushion any inflationary pressure.

“It will provide a dampening effect on the inflationary pressure until the government decides to change (the policy),” he told Bernama in response to the higher consumer price index (CPI) recorded for May.

The CPI rose 1.8%, year-on-year, in May to 121.1 from 119 previously, prompted by costlier fuel and food and non-alcoholic beverages.

The index for the transport group rose 3.8% in May 2018 while food and non-alcoholic beverages, which accounted for 29.5% of the CPI, rose 2.2%.

The CPI measures changes in the price level of the market basket of consumer goods and services purchased by households.

It is one of several price indices calculated by national statistical agencies and used as a measure of inflation.

Between January and May, the CPI registered an increase of 1.7% against the same period last year.

The finance ministry announced earlier this month that the government had allocated RM3 billion to subsidise pump prices until year-end to fix RON95 fuel and diesel at RM2.20 and RM2.18 per litre respectively, while RON97 would be floated on a weekly basis.

Yeah said the higher CPI for May was broadly within market expectation and still manageable as it was below the 2.0% mark. -FMT