Inflation rises slightly in October

Lau: Inflation has been under control for much of the year despite the adjustment to subsidies.

PETALING JAYA: Headline inflation measured by the consumer price index (CPI) rose slightly to 1.9% in October (1.8% in September), driven by higher food prices and despite declines in the transport and communication subsectors.

The CPI is, however, expected to average at 1.9% in 2024 and edge higher to 2.7% in 2025 due to geopolitical tensions and worsening climate impacts, compounded by domestic drivers such as broad-based salary increases and RON95 fuel subsidy rationalisation, says Kenanga Research.

While inflation appears manageable and economic growth prospects are expected to be solid, the research house says the elevated uncertainties heading to 2025 may prompt Bank Negara to maintain the overnight policy rate (OPR) at 3%.

“Bank Negara is likely to adopt a cautious approach, carefully assessing evolving global economic conditions before considering further monetary adjustments,” it stated.

The research house said the fear about price pressures next year may be offset by lower crude oil prices, underpinned by subdued global oil demand, the unwinding of Opec+ supply cuts, and US president-elect Donald Trump’s push to expanded drilling activities in the United States.

“Lower energy costs could provide the government with greater flexibility to advance fiscal consolidation efforts without fuelling inflation,” the research house added.

MIDF Research is also of the view that inflation will moderate to 2% in 2024.

“In view of the stable inflation and no significant demand pressures, we foresee the OPR will be kept at 3% this year and also throughout next year because the current policy setting is deemed as normal, supportive of Malaysia’s economic growth,” the research house added.

Rakuten Trade equity sales head Vincent Lau told StarBiz 7 that inflation has been under control for much of the year despite the adjustment to subsidies.

“Even with the targeted subsidy for diesel and removal of ceiling prices for chicken, we have not seen any drastic increase in prices and are rather stable,” he said.

The Statistics Department’s chief statistician Datuk Seri Mohd Uzir Mahidin attributed the higher inflation in October to the increase in inflation in the main groups of food and beverage at 2.3%, as well as personal care, social protection and miscellaneous goods and services at 3.4%.

“This was offset by a decline in the information and communication group, transport, furnishings, household equipment and routine household maintenance, and recreation, sport and culture,” he noted in a statement.