KUALA LUMPUR, Apr 25 — The global supply chain disruptions due to the Covid-19-triggered lockdowns in China and the ongoing Russia-Ukraine war may continue to boost costs, causing inflation to rise.
Kenanga Investment Bank Bhd has maintained Malaysia’s 2022 headline inflation forecast at 2.9 per cent, noting that with the Covid-19 pandemic still raging on in China, most major cities may continue to remain under strict lockdowns, threatening further disruption to the supply chain.
“On top of that, despite Malaysia’s low exposure to Russia, the ongoing war in Eastern Europe may also put upward pressure on consumer prices, especially on staple foods,” it said in a note today.
The research house noted that the Food and Agriculture Organisation’s (FAO) food price index (FFPI) jumped by 12.6 per cent month-on-month in March, a new record high.
“Nevertheless, government price control scheme and fuel subsidies may help to partially cushion the impact of the rising cost of living for now,” it said.
Moving forward, Kenanga Investment opined that Bank Negara Malaysia (BNM) may likely maintain its accommodative stance at the policy meeting in May to support recovery amid the current sombre global economic outlook and heightened market uncertainties.
Meanwhile, AmBank Research expects upwards inflationary pressure to continue for the rest of the year, much of it due to cost pressures such as high prices of commodities, raw materials and energy, as well as supply disruptions and transportation charges from higher freight charges.
”Our inflation outlook for 2022 is between 2.8 per cent and 3.0 per cent with the job market improving and unemployment projected to be around 4.1 per cent for 2022,” it said, adding that a potential transfer pricing from the producers to end-users is likely.
Nevertheless, it said the upwards pressure on inflation will be contained via subsidies and provides adequate room for BNM to avoid acting aggressively on its rate policies.
“A 25-basis points hike in July is envisaged with the aim of addressing the interest rate differential and providing some buffer for the ringgit against the US dollar.
“Any further rate hikes by BNM would be driven by data and the external environment. Based on our current assessment, there is only a 40 per cent chance of the central bank raising rates in September 2022,” it added.
— Bernama
