January headline CPI was unchanged at 1.5% YoY, slightly below expectations (Consensus & OCBC: 1.6%). Core inflation eased further to 1.8% YoY versus 1.9% in December.
Inflation across most categories eased in January, except for utilities and transport. Specifically, food inflation eased further to 2.0% YoY in January compared to 2.3% in December. Moreover, the impact of higher services tax (8% from 6%) on certain services and higher excise duties on sugar drinks and chewing tobacco, which came into effect on 1 January 2024, was limited as inflation in these categories eased in January versus December.
The inflation outlook hinges on the timeline and mechanism of fuel subsidy rationalisation. OCBC said it forecasts 2024 headline inflation at 2.5%, implying some pick up in price pressures in the coming months. Notwithstanding, inflationary pressures will remain manageable. As such, the bank said it continues to expect BNM to keep its policy rate unchanged at 3.00% in 2024.
