KUALA LUMPUR (Nikkei Markets) -- Malaysia's consumer prices in June accelerated at their fastest pace in 13 months driven mostly by costlier food, official data Wednesday showed, though economists said inflation will likely remain steady through 2019.
Consumer price index -- the country's main gauge of inflation -- rose 1.5% in June from a year earlier, according to a statement from the Department of Statistics. That compares with May's 0.2% year-on-year gain. The index was unchanged from the previous month.
Economists said steady fuel prices due to price control measure will help keep a check on inflation in Malaysia at a time of rising global crude oil prices, allowing policymakers to focus on risks to economic growth.
"Importantly, the trend in core inflation remains benign and we do not expect this to change," Australia & New Zealand Banking Group Economists Mustafa Arif and Sanjay Mathur wrote in a note to clients. "We expect headline inflation to hover near the current level in the coming months."
The surge in June was largely due to comparison with a weak reading year-earlier when Malaysia abolished the goods and services tax. The three-month tax holiday starting Jun. 1, 2018 eased price pressure across the broader economy before the government introduced sales and services tax in September 2018.
The government has also missed its own deadline to introduce a targeted fuel subsidy program by June and remove the price cap on widely-used gasoline and diesel variants. Global oil prices have surged nearly one-third so far this year.
Data out earlier Wednesday show that the food and nonalcoholic beverages index, which carries the largest weighting, climbed 2.3% from a year earlier. The increase was also broad-based among nonfood items such as housing and utility costs.
However, the index for transportation, which includes gasoline and diesel, declined 2.1% year-on-year. Core inflation-which excludes most volatile items such as fresh food and energy prices-rose 1.9% in June from a year earlier.
"We believe the price of transportation will remain subdued," said Affin Hwang Investment Bank Economist Alan Tan. "We expect the transport index to remain negative in the next few months before the introduction of the targeted fuel subsidy."
Policymakers in the third-largest Southeast Asian economy are increasingly worried that heightened external uncertainties and trade tensions between its major trading partners, the U.S. and China, would dent growth prospects. Exports growth has been sluggish, further weighing on prospects of the trade-reliant economy.
Earlier this month, Malaysia's central bank kept the benchmark policy interest rate unchanged, citing downside risks to economic growth tracking external uncertainties. Bank Negara Malaysia had cut its key rate by 25 basis points in May after holding it steady for more than a year.
Economic growth in the first quarter decelerated to 4.5% year-on-year from 4.7% in the previous quarter as consumers trimmed property purchases, while businesses pared investments. The government is expected to report second-quarter gross domestic product data on August 16.