Positive Inflation Trajectory

Positive Inflation Trajectory

Malaysia returned to positive inflation reading for the first time in 12 months at 0.1% y/y in Feb

- Advertisement -Positive Inflation Trajectory

Malaysia returned to positive inflation reading for the first time in 12 months at 0.1% y/y in Feb (Jan: -0.2% y/y). This came in close to ours (+0.3%) and Bloomberg consensus (+0.2%). The small positive uptick in Feb inflation was largely due to higher prices of fuel, selected food items, alcoholic beverages, and furnishing & household equipment amid the ongoing containment measures and electricity bill discounts during the month.

Although year-to-date inflation averaged -0.1% in the first two months of 2021 (Jan-Feb 2020: +1.5%), the full-year reading is expected to average higher at a positive rate of 3.0% (2020: -1.1%). This comes as the economy is expected to recover further following the roll-out of vaccines and additional policy support, higher commodity prices, and year-ago low base effects. We project Brent oil prices to hover between USD60-70 /bbl this year (2020: average USD43.21).

Despite higher inflation outlook this year, we expect muted underlying demand price pressures amid elevated unemployment rates to keep Bank Negara Malaysia (BNM)’s monetary policy stance in neutral mode.

BNM is also less likely to use broad and blunt policy tools at this juncture. In line with a more targeted fiscal approach to aid recovery this year, BNM is more inclined towards targeted measures including the recent upsizing of targeted SME financing funds by RM2.7bn under the latest PERMERKASA package. We project the key policy rate to remain at 1.75% for the rest of 2021.

The next monetary policy decision is scheduled on 6th May 2021.

Latest news

Related news

Join us in Telegram for more news and updates.
Join us in Telegram for more news and updates.