May CPI: Closing the window for lower rates

Higher-than-expected May’s Consumer Price Index (CPI) of 0.50% m-m (April: 0.36%) on higher staple foods prices in the lead up to the fasting month, increasing volatile prices 1.52% on a m-m basis (April: -0.91%), is likely to have closed the window for the central bank to lower its benchmark interest rate for the rest of the year.  

Prices for other items also rose, including clothing (+ 0.23% m-m), health-related products (+0.34% m-m) and housing (+0.20% m-m) (exhibit 1). On a y-y basis, May inflation was up 7.15% y-y, above the street estimate of 7.01% y-y, and higher compared to the April level of 6.79% y-y (exhibit 2). Thus, 5M15 CPI is now in positive inflation territory at 0.42% (5M14: 1.55%), albeit still low, mainly helped by subdued commodity prices during the March-April harvesting period.

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