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BNM: Malaysia’s headline inflation to fall within 2.8%-3.8% range this year
KUALA LUMPUR (April 3): Malaysia’s headline inflation will fall in the upper end of Bank Negara Malaysia’s forecast range of 2.8%-3.8% this year if the government proceeds with fuel subsidies rationalisation, according to the central bank’s assistant governor Fraziali Ismail.
“We spoke about RON95, it is a huge bill to the government, it is not sustainable, we need that money to do other things for the economy. To the extent that it is coming, we will land closer to the upper end of our range,” he told an audience in a panel discussion organised by the Malaysian Economic Association at the Asia School of Business.
“We have ruled out the government coming out with a big subsidies adjustment, it is not going to happen like how it happened in 2007 or 2008, we had a big jump, over 70 sen in fuel prices, we don’t think that is going to be the case, there could be some [increases], and could land us within that [forecasted] range,” he said.
Fraziali said while inflation is showing signs of easing recently, it is likely to stay elevated for a longer period.
However, he assured that Malaysia’s inflationary pressure is not as bad as certain advanced economies experienced last year.
“Let me be very clear, we are not facing an inflation situation as in the case of in the West, why? Because our job market is not like in the US, the UK. Secondly, we don’t have that kind of stimulus like the Fed or ECB did during the crisis, so they are still working through the excesses and all that, we don’t have that.
“Our inflation is just higher than what we are accustomed to, we need to watch it very carefully, so that it doesn’t become unhinged,” he explained.
On whether BNM will deliver another rate hike or continue to pause overnight policy rate in the next Monetary Policy Committee meeting in May, Fraziali, who is also a member of the nine-member committee, said it depends “on how strong the domestic economy and inflation is for us to go beyond the so-called normalisation”.
BNM raised its benchmark interest rates by 100 basis points to 2.75% last year in its bid to tame inflation, before pausing twice in the last two MPC meetings.
Source: https://www.theedgemarkets.com/node/661829