Malaysia: Inflationary pressures, price hikes temporary

• Feb 17, 2022

KUALA LUMPUR: The Institute for Democracy and Economic Affairs (Ideas) believes that the inflationary pressures and price hikes that Malaysia is facing is temporary and can be effectively controlled through proper monetary and fiscal policies.

According to the Statistics Department, the country’s inflation rate (as measured by the Consumer Price Index) increased 3.2% year-on-year in December 2021, mainly due to the rise in food and fuel prices and the low base effect.

In a statement yesterday, Ideas said even though the inflationary trend is disconcerting, inflation can be controlled efficiently in the short to medium term through the timely deployment of monetary policies.

It noted that the US Federal Reserve has signalled that it would increase its Overnight Policy Rate (OPR) multiple times this year to tame inflation.

“Malaysia will likely follow suit by increasing its OPR gradually in 2022 and 2023, whereby Bank Negara is expected to increase the OPR by about 50 basis points in the later half of this year,” it said.

Meanwhile, Ideas director of economics and business unit and acting director of research Dr Juita Mohamad said the current rise in inflation is a global issue, stemming from stronger demand and higher energy prices, after two years of battling the pandemic through lockdowns.

“The pandemic and the lockdowns led to both demand and supply shocks at a global scale. As a small and open economy, Malaysia was not immune to the devastating aftermath posed by the pandemic. Inflationary pressure is further compounded by the recent floodings in the country, which puts a strain on the supply of selected essential goods produced locally,” she said. — Bernama