KUALA LUMPUR – The government’s move to raise the retail prices of RON95 petrol and diesel by 20 sen a litre effective today would cause an upward but manageable pressure on inflation, RHB Research said.
The price of RON95 increased to RM2.30 a litre from RM2.10 a litre previously while diesel rose to RM2.20 a litre from RM2.00 a litre.
The research house said it expected the inflation pressure to hold up in the fourth quarter of 2014, however, the impact on inflation would likely be more muted due to the higher base effect in the fourth quarter of last year.
In a note today, it said in light of the fuel price hike, it projected inflation to come in at the higher end of their forecast of 3.0-3.4 per cent in 2014, compared with 2.1 per cent in 2013.
It said its forecast had already factored in the expectations of another round of fuel prices hike.
The research firm added that while the Government could still proceed with its proposed targeted fuel subsidy scheme and announce it in the upcoming budget, it was debatable whether it should go ahead with it.
“Consequently, we expect the central bank to be more cautious and focus its policy stance on sustaining the country’s economic growth, and keep the Overnight Policy Rate at 3.25 per cent for the rest of the year,” it added. – Bernama