Govt’s Direct Intervention Necessary to Contain Inflation: Economist

IHH Markit: Inflation Takes Centre Stage
COVID-19 cases will be worth scrutinising in the coming weeks for potential further disruption to economic conditions - Photo:

The looming inflation in the country is a global phenomenon that needs to be tackled through the government’s direct intervention in supply chain factors and increasing the supply of inputs, an economist told Business Today.

Sunway University School of Business Professor Dr Yeah Kim Leng said that the present spike in prices is a global phenomenon on account of the production shortfall, increase in the price of outputs, and climate factors that have resulted in disruption in supply.

Yeah, said that the government must look at increasing the supply of products and look into the availability of substitutes to ensure the price hike of products are contained.

“The government must also ensure that there is no hoarding of goods and increase its enforcement activities that would deter artificial increase in price that would exacerbate the current price situation, “he said.

In addition, Yeah said that the government must also ensure that subsidies to farmers and producers are increased which would allow for prices to be stabilized.

Yeah said that the present hike in prices should provide “food for thought” of getting more youths to go into the agricultural sector through modern farming and ensuring that there is food security in the country.

Bank Negara Malaysia announced yesterday that headline inflation had increased to 2.9% in October (September 2.2%) mainly due to the lapse in the 3-month electricity bill discount under Pakej Perlindungan Rakyat dan Pemulihan Ekonomi (PEMULIH). The lapse in the electricity discount contributed 0.6 ppt to headline inflation.

BNM said that underlying inflation, as measured by core inflation, was also marginally higher at 0.7% (September: 0.6%) due to the gradual reopening of the economy.

On the other hand, in the United States, Federal Reserve Chairman Jerome Powell warned Congress yesterday that while inflation is expected to move down “significantly” over the next year, it “now appears that factors pushing inflation upward will linger well into next year.”

The new COVID-19 variant Omicron could harm employment and inflation, Powell told Congress Tuesday in his prepared remarks.

“The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation. 

Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labour market and intensify supply-chain disruptions,” Powell said.

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