KUALA LUMPUR, Aug 24 — The consumer price index rose to 3.2 per cent in July compared to the same period last year on the back of cheaper fuel and modest easing in food cost pressure, Nikkei Asia reported.

Citing economists the Japan-based business paper said inflation is expected to moderate in the next few months, giving room for Bank Negara Malaysia (BNM) to keep its policy interest rate this year.

The CPI rose 3.2 per cent in July from a year earlier, the Department of Statistics said in a statement. This was lower than Nikkei's Markets poll estimation of a 3.6 per cent year-on-year increase.

But compared to June this year, the inflation rate dropped 0.1 per cent.

"We expect BNM to maintain the Overnight Policy Rate at the current level of 3 per cent until end-2017 against a backdrop of strong economic growth and a lack of demand-driven price pressures," CIMB Investment Bank's Economist Michelle Chia was quoted saying.

The next BNM's monetary policy committee meeting is scheduled for September 7.

The food and non-alcoholic beverages index, which carries the largest weighting at 30.2 per cent, climbed 4.2 per cent from a year earlier in July. It had risen 4.3 per cent in June.

The index for transport group, that includes gasoline and diesel, rose 7.7 per cent year-on-year but decelerated from June's 10.5 per cent annual increase.

Core inflation, which excludes most volatile items such as fresh food and energy prices, rose 2.6 per cent in July compared with the same month last year.

RHB Research Institute in an investor note said the latest figures showed inflation remained stable, which could provide further reasons for BNM to maintain its overnight policy rate.

"Underlying inflation remained stable, indicating subdued demand pressure and providing further reasons for the central bank to maintain its monetary policy stance," it said.

Headline inflation is expected to ease to 2.8 per cent year-on-year in the second half from 4.1 per cent in the first half amid lower fuel prices and as effects from low-base wanes, RHB Research added.