KUALA LUMPUR, Dec 23 — MIDF Research opined that the inflation trend in Malaysia is highly driven by robust consumer demand while indicators for cost inflation have eased in recent months.
Malaysia’s core inflation rose to a new high hitting a peak point at 4.2 per cent year-on-year (yoy) in November 2022 after registering 4.1 per cent yoy in the previous month, reflecting underlying domestic demand
On a sequential month basis, it said core prices still recorded 0.4 per cent month-on-month increase.
Job market performances have been improving, with employment growth above three per cent yoy for seven straight months since April 2022 while imports of consumption goods and distributive trade sales continued to expand by a double-digit pace at 21.6 per cent yoy and 15.2 per cent yoy respectively in October 2022.
“Headline inflation continued on a moderating trend despite remaining at four per cent yoy in November 2022. Non-food inflation edged up slightly to 2.5 per cent yoy while food inflation rose to a new record high at 7.3 per cent.
“With this upbeat momentum, we believe Bank Negara Malaysia is likely to raise the Overnight Policy Rates (OPR) by another 25 basis points (bps) to three per cent in the first Monetary Policy Committee (MPC) meeting next year in January 2023,” the research house said in a note today.
MIDF Research shared that in the environment of elevated global commodity prices, inflationary pressure in Malaysia is affected via higher food inflation, hence expect food price growth to record 5.5 per cent this year, which is also attributable to the depreciation of the ringgit.
“With domestic demand firming, we project headline inflation to average 3.2 per cent in 2022,” it noted.
Moving into 2023, MIDF Research noted supply-push factors on inflation are expected to soften among others underpinned by an expected appreciation of ringgit, moderation in food prices, further easing in global supply chain pressure and normalising commodity prices.
“Post 15th general election, Malaysia’s inflation outlook is much clearer for next year as we expect the coalition government is very likely to keep the current fuel-subsidy mechanism status quo. Hence, headline inflation is predicted to average at 2.3 per cent for 2023,” it said.
The research house added it also believes global inflation will soften modestly in 2023, underpinned by a slight correction of commodity prices and an improving global supply chain especially related to food products.
— Bernama
