KUALA LUMPUR (Aug 8): MIDF Research has not discounted the possibility of Bank Negara Malaysia considering more restrictive interest rates given the robust and resilient domestic demand.

In an economic brief on Tuesday (Aug 8) following the release of Services Producer Price Index (SPPI): Second Quarter 2023, MIDF said that with spending expected to continue growing, the SPPI will likely sustain inflation in the coming quarters, but the moderation may continue due to the higher base effect.

The research house said the SPPI averaged 114.9 points in the second quarter of 2023 (2Q2023), an increase of 2.7% compared to 111.9 in the same quarter of the preceding year.

It said most subsectors recorded an increase in this quarter, particularly accommodation and food & beverage service activities recorded a 6.3% increase (1Q2023: 8.3%) and the transportation subsector increased by 4.8% (1Q2023: 6.5%).

MIDF said Malaysia’s SPPI inflation slowed to +2.7% year-on-year (y-o-y) in second quarter of calendar year 2023 (2QCY2023), from +3.4% y-o-y in 1QCY2023, the slowest rise in four quarters.

It said the slower price increases were mainly attributable to the moderation in transportation inflation, the second largest in terms of weightage in the SPPI, which eased to a four-quarter low of +4.8% y-o-y (1QCY2023: +6.5% y-o-y).