KUALA LUMPUR, July 28 — Bank Negara Malaysia (BNM) will likely lower its current headline inflation forecast of 2.8 per cent to 3.8 per cent for 2023, given the faster-than-expected easing of prices, said BMI Industry Research (BMI), a Fitch Solutions company.
It said government subsidies and price-control measures will help place an implicit cap on further price increases.
“Broadly speaking, inflation in Malaysia has been lower compared with regional peers, as inflation in Indonesia, the Philippines and Singapore came in at 3.5 per cent, 5.4 per cent and 4.5 per cent, respectively, in June,” it said in a statement today.
In June, Malaysia’s inflation eased to 2.4 per cent versus 2.8 per cent in May, registering the lowest print since the start of the year.
As such, BMI said it has lowered its forecast for inflation to the 10-year average of 2 per cent by year-end from its previous forecast of 2.5 per cent
Concurrently, it also revised its average inflation forecast for 2023 down from 2.9 per cent to 2.7 per cent, which is much lower than 2022’s average of 3.4 per cent.
“As BNM navigates the end of the global rate hike cycle, falling inflation and persistent growth headwinds, we expect the central bank to stand pat in the upcoming meeting in September 2023,” it said.
It said since the surprise 25-basis-point hike in May, real interest rates in Malaysia have turned slightly positive, and believes the current policy stance is sufficient to keep inflation in check.
“Although BNM does not have an official inflation target, the headline is trending towards the 10-year average of 2 per cent, which reduces pressure to act.
“BNM will unlikely cut when the United States Federal Reserve is still tightening interest rates for fear of sparking unwanted currency weakness,” said BMI.
Globally, it expects headline inflation to continue easing due to high base effects from last year’s surge in global food and energy prices triggered by the Russia-Ukraine war.
— Bernama
