Inflation eases in September

PETALING JAYA: Malaysia’s headline inflation rate rose 4.5% year-on-year (y-o-y) in September, suggesting consumer price pressures may have peaked at 4.7% in August.

The increase in the consumer price index (CPI) was less than the 4.6% growth forecast by 16 economists in a Reuters poll.

The faster-than-expected abatement was primarily thanks to the lower prices of food, non-subsidised fuels and the maintenance and repair of dwellings despite a weaker currency and year-ago low base effects.

“Owing to base effects, stickier global inflation conditions and heightened currency volatility, we keep the view that Malaysia’s consumer price inflation will likely stay above the 4% level for the rest of the year before decelerating towards the 2% level by the fourth quarter of 2023 (4Q23).

“Hence, we maintain our full-year inflation forecast at 3.5% for 2022 and 2.8% for 2023, barring any changes in domestic policy, particularly the fuel and electricity subsidies as well as ceiling prices for staple food,” UOB Global Economics & Markets Research said in a report yesterday.

In a statement yesterday, the Statistics Department said food inflation increased at a slower rate of 6.8% as compared to August 2022 (7.2%).

Apart from the food group, among groups that recorded a high increase were restaurants and hotels at 6.9% followed by transport (5.3%); furnishings, household equipment and routine household maintenance (4.4%); and housing, water, electricity, gas and other fuels (4%).

The Statistics Department noted that the slow increase in the food group in September 2022 was driven by a moderate increase in the component of food at home, which was at 5.7% as compared to 6.4% in August 2022.

This increase was driven by the increase in all subgroups of food which recorded an increase of between 3.3% and 8.8%.

On a monthly basis, the inflation in September 2022 moderated to 0.1% as compared to 0.2% in August 2022.

“The inflation for the period of January to September 2022 was 3.3% as compared to the same period of the previous year,” the department said.

Inflation for 3Q22 increased by 4.5% as compared to the same quarter of the previous year.

“Core inflation registered an increase of 4% in September 2022 as compared to August 2022 (3.8%),” the department said.

Core inflation measures changes in the price of all goods and services, excluding volatile items of fresh food as well as administered prices of goods by the government.

UOB added given that inflation expectations are anchored to official targets and risks to the domestic growth outlook are tilting to the downside, Bank Negara will likely take a pause in November to assess the effect of its cumulative 75 basis points of rate hikes to date.

“We reiterate our call for the overnight policy rate to be left unchanged at 2.5% at the coming Nov 2-3 meeting, which is the final monetary policy meeting for the year,” the bank forecast.