KUALA LUMPUR, Jan 23 — RAM Rating Services Bhd (RAM Ratings) has trimmed its headline inflation forecast for 2019 to two per cent from the 2.7 per cent projected earlier.
In a statement today, the credit rating agency said the downward revision was mainly due to the changing expectations on global crude oil prices, which were increasingly pointing to a lower average range of US$60 to US$65 per barrel for this year.
“Our sensitivity analysis indicates that for every US$5 per barrel move in the price of Brent crude oil, headline inflation potentially changes 0.3 percentage point,” it said.
Meanwhile, RAM Ratings also estimated the country’s inflation to inch up to 0.3 per cent in December 2018 from 0.2 per cent in the previous month amid dissipating deflationary pressures from the transport fuel component.
“The price of RON95 petrol fell 3.3 per cent year-on-year in December 2018, following a 4.5 per cent drop in November.
“As such, overall inflation is envisaged to come in at one per cent in 2018,” it said.
On the impact from the weekly automated pricing mechanism (APM) for pump prices which was reinstated this month, RAM Ratings said the APM was not expected to exert any significant downward pressure on inflation in the short term.
It said the APM would be in place ahead of the fuel subsidy mechanism anticipated to be implemented in the second quarter of this year.
“Moreover, global crude oil prices are also expected to trend a little higher compared to the start of the year,” it added.
RAM Ratings noted that should the crude oil prices rise beyond RM2.20 per litre, it would trigger the use of subsidies to maintain the ceiling, which would subsequently contain the inflationary pressure. — Bernama
