The easing of inflation in Malaysia is likely to continue into the second half of 2023 (2H2023) as prices in the market showing moderation, Malaysia University of Science and Technology (MUST) professor Geoffrey Williams said.
He said inflation is expected to stay low, probably between 2% and 2.5% in 2H2023.
“Price rises have slowed across almost all categories and especially restaurants and food products, which have been quite stubborn. Internet and mobile costs are actually getting cheaper.
“This is a general slowdown in inflation across many sectors, which is a good sign that prices are moderating,” he said.
The headline consumer price index in Malaysia is showing an easing momentum, where it stood at 2.4% in June 2023, the lowest level recorded so far in 2023, compared with 2.8% in May, 3.3% in April, 3.4% in March and 3.7% in February and January respectively.
On June’s inflation figure, Williams said the figures, which was very much below regional and global peer, was good news to the country and very much in line with what the consensus has been predicting since January.
He said the lower inflation figures not only showed that the policies of Bank Negara Malaysia (BNM) and the government are working but also a sign of global factors, especially oil prices, which are around half the level now than they were last year.
“We are finally seeing the impact of lower oil and supply-chain costs coming through as expected,” he said.
He said this suggested that no further action is required through the overnight policy rate (OPR) but instead, the focus could be on stabilising growth against a slower global economy.
“The battle on prices is now not so much on inflation or price increases but on price levels and affordability,” he said.
“Hence, this is really the role of the government to raise incomes, promote competition, remove monopolies and help consumers to make smart choices,” he said.
Williams said the government is suggested to address greedflation, where companies are passing on cost increases to customers to protect their own profits.
He said 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.
He added that the lower inflation figure would help end the pressure on BNM to raise the OPR and that there could be a pause in interest rates for the rest of the year.
Meanwhile, AmBank (M) Bhd in a research note said an increase in the headline inflation by 0.2% month-on-month throughout the remainder of the year would translate into a full-year reading of 2.7%, which is below the bank’s all-year forecast range of between 3% and 3.5%.
“On core inflation, the downward momentum is expected to persist as the lag effect from the interest rate hikes made by the central bank to sustain.
“Therefore, we do not see any urgency for the interest rates to be increased higher from this point forward and we reaffirm our view of OPR to be at 3% throughout the year,” it said.
The BNM monetary policy committee (MPC) meeting on July 6 kept the OPR unchanged at 3%.
The next meeting is scheduled on Sept 6-7, 2023.
