After the Department of Statistics released the latest Consumer Price Index for June which went up to 3.4%, MIDF Research said it will keep its CPI forecast to +2.8% for 2022.
In the environment of elevated global commodity prices, inflationary pressure in Malaysia is affected via higher food inflation. The research house expects food price growth to record at +4.5% this year (beginning year estimate: +3.5%) among others attributed to the removal of subsidies on several food items. On a different note, the slight downward trend in global commodity prices may ease Malaysia’s food inflation pressure in 2H. As for fuel subsidy, it believes the Government to maintain the current mechanism at least until the end of this year. With domestic demand firming, MIDF forecasts headline CPI to average at +2.8% for 2022.
Core inflation rushed to more than a 6-year high. As domestic demand strengthened, core inflation rose by +3.0%yoy, the fastest gain since Apr-16. The continuous upward trend in core CPI indicates the underlying price pressures from surging domestic demand, underpinned by improving labour market conditions and domestic reopening effects. MIDF opines the steady uptick in core inflation will increase the chances that BNM will consider another rate hike in Sep-22. Malaysia’s headline inflation rose slightly higher than Bloomberg’s consensus, to +3.4%yoy vs. +3.1%yoy. As of 1HCY22, average headline inflation is +2.5%yoy (1HCY21: +2.3%yoy), still within BNM’s inflation forecast range +2.3~3.3%. Non-food CPI rose by +2.0%yoy while food inflation hit a record high +6.1%yoy. On a month-on-month basis, all major CPI components including core CPI registered a positive growth rates.
