Malaysia: Inflation comes in at highest level since March 2017 in April
Consumer prices rose a seasonally-adjusted 0.16% in April over the previous month, coming in below the 0.33% rise recorded in March. April’s result marked the softest rise in prices since November 2020. Looking at the details of the release, April’s softer rise largely reflected lower price pressures for transport, which more than offset increasing costs for food and non-alcoholic beverages.
Inflation rose to 4.7% in April, markedly above March’s 1.7%. April’s result was the highest inflation rate since March 2017. The annual average variation of consumer prices came in at minus 0.6% in April, above March’s minus 1.2%.
Commenting on the inflation outlook and the implications for monetary policy, Julia Goh and Loke Siew Ting, economists at UOB, said:
“Headline inflation is projected to reverse course and come off to below 4.0% levels from Jun onwards. Rising pandemic-related risks and a weak labour market will continue to mitigate the impact of supply-led inflationary pressures, keeping overall inflation in check. We expect Bank Negara Malaysia (BNM) to remain on hold for the rest of the year, following its unchanged expectations of a robust GDP growth of 6.0%-7.5% for 2021 (despite a nationwide MCO 3.0) and a transitory price increase.”
Dhiraj Nim and Sanjay Mathur, economists at ANZ, concur:
“Since the spike in inflation is largely driven by a low base, it is a non-issue for monetary policy. Moreover, there may also not be any sizeable benefits of easing the policy rate further. We therefore expect Bank Negara Malaysia to remain on hold this year, while keeping its stance accommodative to support growth.”