KUALA LUMPUR (Nikkei Markets) -- Malaysia's consumer prices rose at a slightly slower-than-expected pace in July as costlier food was offset by cheaper fuel-related costs, official data Wednesday showed.
The consumer price index - Malaysia's main gauge of inflation - rose 1.4% in July from a year earlier, according to the Department of Statistics. That compares to a median 1.5% increase predicted in a Nikkei Markets poll and June's 1.5% year-on-year gain. The index gained 0.1% from previous month.
Economists said inflation will likely stay benign in Malaysia as cheaper fuel-related costs would help cushion rising price pressure of imported items, particularly food, through 2019.
"The latest inflation data continue to underscore our view that the current pace of economic activity is insufficient to generate meaningful price pressures, a trend that we expect to extend into the coming months," said Australia & New Zealand Banking Group Economist Sanjay Mathur.
That could provide room the central bank to potentially cut interest rates if growth in Southeast Asia's third-largest economy deteriorates further. Economic expansion has already decelerated, growing 4.5% year-on-year in the first quarter from 4.7% in the previous quarter.
The government is expected to report second quarter gross domestic product data on Friday.
Policymakers in Malaysia are increasingly worried that escalating trade tensions between its major trading partners would dent exports and hurt broader economic growth prospects. The government is considering "contingency measures" in the event the U.S.-China tariff spat escalates or worsens.
In May, Bank Negara Malaysia cut the benchmark overnight policy rate by 0.25 percentage-point for the first time in nearly three years to perk up growth in a slowing economy. The ringgit has lost nearly 1% against the U.S. dollar since then.
"Food inflation is expected to stay at high-side moving forward as Malaysia is a net importer of food and ringgit depreciation could make the items more expensive," MIDF Amanah Investment Bank wrote in a note to clients.
Data out earlier Wednesday showed that the food and non-alcoholic beverages index, which carries the largest weighting at 29.5%, climbed 2.4% from a year earlier in July. The index for transport group, that includes gasoline and diesel, declined 1.9% year-on-year.
Core inflation--which excludes most volatile items such as fresh food and energy prices-rose 2% in July when compared to the same month last year.