Food inflation lower at 3.8% in January

KUALA LUMPUR: Headline inflation moderated to 2.7% in January, mainly due to lower transport inflation at 5.7% compared to 11.5% in December 2017, said Bank Negara Malaysia (BNM).

“Although RON95 petrol averaged slightly higher at RM2.28 per litre in January 2018 (December 2017: RM2.27 per litre), the higher base of RON95 price in January 2017 (RM2.10 per litre) compared to December 2016 (RM1.90 per litre) resulted in lower inflation in the transport category,” the central bank said in a statement today.

BNM said food inflation was also lower at 3.8% (December: 4.1%), reflecting lower inflation in the fish and seafood category.

It said there was a higher current account surplus in the fourth quarter of 2017 (4Q 2017) as the current account surplus widened, reflecting a larger goods surplus and lower secondary income deficit.

Going forward, BNM said the current account surplus was expected to continue registering a healthy surplus, supported mainly by the goods account.

“Net financing growth continued to support economic activity as it increased to 7.2% in January 2018 (December 2017: 6.9%),” said BNM.

It said the growth of net outstanding issuances of corporate bonds continued to increase, with a double-digit growth rate of 16.6% (December 2017: 15.4%).

The central bank said the growth of outstanding loans of the banking system also increased slightly to 4.2% (December 2017: 4.1%).

The growth of outstanding business loans increased to 2.0% in January 2018 (December 2017: 1.8%), driven mainly by wholesale and retail trade, restaurants and hotels, real estate, construction, and primary agriculture sectors, said BNM.

“Banking system capitalisation remained strong as financial institutions are well-positioned to withstand macroeconomic and financial shocks, with excess capital buffers of RM140 billion as at January 2018,” said the central bank.

More than 75% of total capital, comprised high-quality loss-absorbing capital in the form of Common Equity Tier 1 Capital (i.e. equity, retained earnings and reserves), it said.

BNM said financial markets attracted non-resident inflows amid positive sentiments as in January, the domestic financial markets were supported by positive sentiments, driven by Malaysia’s strong economic outlook and higher global oil prices.

“As a result, the Malaysian Government Securities (MGS) and equity markets attracted non-resident inflows amounting to RM4.2 billion and RM3.4 billion respectively.

“Following the inflows, the ringgit appreciated by 4.3% against the US dollar and the FTSE Bursa Malaysia KLCI increased by 4.0% in January, while in the bond market, three-year, five-year and 10-year MGS yields increased by five basis points each, following the increase in the overnight policy rate (OPR) by 25 basis points.

“The impact of the OPR increase on MGS yields was mitigated by non-resident inflows into the MGS market,” said BNM.

Meanwhile, BNM said FX swap volumes increased by US$11.3 billion to US$112.1 billion, contributed mainly by the portfolio investments hedging activities of non-residents. -FMT