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Upward trajectory in price changes to remain, say Research houses
Published on: Tuesday, November 30, 2021
By: Bernama
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Kuala Lumpur: The upward trajectory in inflation changes would remain and may further accelerate during the upcoming months as can be seen in other countries, AmBank Research said.

It said considering that the Producer Price Index (PPI) recorded the sixth consecutive month of double-digit increase during September, it is expected business will transfer pricing to consumer to maintain survivability during these pandemic times.

“But the effects should be limited following Prime Minister Datuk Seri Ismail Sabri Yaakob’s recent announcement on a RM262 million allocation as an early response to assist farmers being hit by a hike in fertiliser and pesticide prices.

“The ceiling imposed on the fuel price should also help cool down the increasing pace in overall inflation,” it said in a note Monday.

For the full year, AmBank Research is maintaining its inflation projection at between 2.6 per cent and 2.8 per cent with no change to the overnight policy rate outlook of 1.75 per cent.

It said global supply chain network disruptions, higher commodity prices and labour shortages continue to affect price movements in the economy.

In October 2021, an increase for the second consecutive month was seen in Malaysia’s Consumer Price Index (CPI) by 2.9 per cent year-on-year (y-o-y) compared to 2.2 per cent in September, the fastest pace since June.

This brings the average inflation for the first 10 months to 2.3 per cent.

Meanwhile, CGS-CIMB reiterates its expectation for the OPR to remain at 1.75 per cent until mid-2022 to aid economic recovery, and expects Bank Negara Malaysia to deliver two 25 basis points rate increases in second half once the recovery is entrenched.

It said reflecting higher RON97 petrol retail prices as a result of global crude oil prices surging past US$80 per barrel in October 2021, fuel and lubricating personal transport equipment index increased 23.9 per cent y-o-y and 0.4 per cent month-on-month (m-o-m) during the month.

Nevertheless, the pass-through of a 12 per cent m-o-m increase in global oil prices was curtailed by price cap on RON95 petrol at RM2.05 per litre and diesel at RM2.15 per litre.

The end of a three-month discount on electricity tariffs led to higher inflation for electricity (34.6 per cent y-o-y and 32.2 per cent m-o-m), while the resumption of interstate travel and dine-in resulted in a modest pick-up in restaurants and hotels inflation (0.6 per cent y-o-y and 0.3 per cent m-o-m).

Food inflation, which rose slightly to 2.0 per cent y-o-y in October, was the highest since September 2019, and is expected to accelerate further in the near term, as rainy season, rising costs of raw materials and freight charges cascaded to selling prices of food commodities such as vegetables, bread, chicken and eggs.

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