KUALA LUMPUR: The consumer price index -- a measure of inflation -- in May grew by 1.8 per cent compared to a year ago.
It is the highest in 13 months.
"While inflation would remain steady in the short-term, we do not rule out a knee-jerk reaction upwards from the anticipated policy reforms in the second half of the year. This was especially the long-overdue subsidy rationalisation plan," commented Alliance Research chief economist Manokaran Mottain.
He said while the government may likely retain subsidies for certain foodstuffs, it may be pressured to realign the subsidies for fuel and fuel-related products in order to achieve the targeted fiscal deficit of 4 per cent for this year.
"However, the cut in subsidy would certainly be more gradual and measured pace.'
The research house maintained its full-year target of 2.5 per cent growth for the CPI this year.
Mottain also expects the overnight policy rate (OPR) to remain steady at 3 per cent for the rest of 2013.