KUALA LUMPUR: Inflation is expected to decelerate further as price increases moderate across the board, negating any further need for Bank Negara Malaysia (BNM) to raise the overnight policy rate.
Malaysia's headline consumer price index (CPI) in June slowed to 2.4 per cent from a year earlier and core inflation also slowed to 3.1 percent compared with last year.
Malaysia University of Science and Technology economist Dr Geoffrey Williams told the New Straits Times that price rises have slowed across almost all categories and especially restaurants and food products which have been quite stubborn, while internet and mobile costs are actually getting cheaper.
He said this is a general slowdown in inflation across many sectors which is a good sign that prices are moderating.
"The lower inflation figures show that the policies of BNM as well as the government are working but they are also a sign of global factors, especially oil prices which are around half the level now that they were last year," Williams said.
He added that Malaysia is finally seeing the impact of lower oil and supply-chain costs coming through as expected and this is good news for the economy as it suggests that no further action is required through the overnight policy rate (OPR).
The OPR currently stands at 3 per cent.
He said instead the focus can be on stabilising growth against a slower global economy.
According to Williams, the battle on prices is now not so much on inflation or price increases but on price levels and affordability.
Thus, he said this is really the role of the government to raise incomes, promote competition, remove monopolies and help consumers to make smart choices.
"The government must help in combating greedflation, where companies are passing on cost increases to customers to protect their own profits. "For example the food price increases that were threatened last month should now not be necessary and greedy companies should not pass on costs to consumers. "As far as Bank Negara is concerned the lower inflation figure ends the pressure to raise the OPR and my view is that there can be a pause in interest rates for the rest of the year," he noted.
Meanwhile, Malaysian Institute of Economic Research senior research fellow Dr Shankaran Nambiar opined that the government has managed to keep the official consumer price index (CPI) figures and headline inflation very much under control.
He added that core inflation which showed some signs of pressure in the last announcement has eased for the June announcement. "If there are no shocks, and if there is not too much of a disruption with Fed rates in the coming months, inflation could come down to 2.4 per cent for the second half of 2023 (2H23).
"This would put the whole year inflation at about 2.8 per cent, which is well within the lower end of the official forecast," he said.
Nevertheless, Shankaran said there is a divergence between popular perceptions of inflation and the official account.
He noted that the individual felt-experience may not be in line with official figures and this cannot brush aside as individual perceptions.
"Figures at a more aggregate level may conceal what is happening in specific locations," he noted.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said the inflation should moderate assuming there are no changes to subsidies and price control policies.
He added that moderation in inflation rate would mean that the rising prices are still occurring but the pace of the appreciation has slowed.
"This would give the consumers some breathing space in order for their income to catch up. "Also, the real rate of interest has turned positive to 0.6 per cent which means that if they save their money in the bank, the households would be better off since the return can beat the inflation rate," he said.
Afzanizam forecasts an inflation rate of 2.7 percent for the second half of 2023 and a full-year rate of three percent.
Source: https://www.nst.com.my/business/2023/07/934558/inflation-slow-further-bnm-stand-pat-opr