KUALA LUMPUR, March 11 — Headline inflation is projected to be lower at between 2.0 per cent and 3.0 per cent in 2015, compared with 3.2 per cent last year, mainly due to lower energy and food prices.

In its 2014 Annual Report, Bank Negara Malaysia (BNM) said lower global oil prices which are expected to average at US$51 per barrel, would lead to lower domestic fuel prices and offset the impact of the Goods and Services Tax (GST).

BNM also said inflationary impact would be contained as basic necessities such as fresh food and utilities would be zero-rated or exempted from the GST, hence reducing the extent of overall price increases.

Furthermore, some items, such as clothing and electrical appliances, were already subject to the same or higher tax rates under the Sales and Services Tax.

“Inflationary pressures stemming from domestic demand factors are also expected to be modest following more moderate growth in household spending and relatively stable wage growth,” the central bank said.

It said external price pressures are also projected to remain weak with global food prices expected to trend lower in 2015, due to ample supply, amid favourable weather conditions in the major producing countries.

However, there was still the risk of the inflation trajectory during the year to be exposed to some degree of volatility in the market, especially from the uncertainty surrounding the direction of global oil prices.

“Excluding the volatile fuel prices and the one-off impact of the GST, the underlying inflation is expected to remain relatively stable,” BNM added. — Bernama