THE inflation rate in Malaysia continued to soar due to surging food prices, with the consumer price index (CPI) rising 4.4 per cent year-on-year (y-o-y) in July, faster than the 3.4 per cent y-o-y increase in the previous month.
The latest numbers, released by the Department of Statistics Malaysia on Monday (Aug 29), were largely in line with the median forecast of an earlier Bloomberg poll of economists.
On a monthly basis, the CPI increased 0.4 per cent from June to July. For the first 7 months of 2022, Malaysia's inflation increased 2.8 per cent as compared to the same period in 2021.
Higher food prices remained the main cause of the high inflation, with the food index increasing by 6.9 per cent in July. Food items that recorded the highest price growth were fish and seafood (4.2 per cent) and vegetables (7.1 per cent), according to the DOSM.
"The increase in July's inflation was also due to the lower base effect last year as a result of the electricity bill discount of between 5 per cent and 40 per cent given to domestic consumers under the government's National People's Well-being and Economic Recovery Package from July to September 2021," the department said.
Other than food prices, the restaurants and hotels segment saw a 5.8 per cent in prices, while transport prices rose 5.6 per cent.
DOSM noted that 81 per cent - or 449 items out of 552 items - saw their prices go up in July this year. Among these, 53 items registered a price growth of more than 10 per cent.
Core inflation - which measures changes in the prices of all goods and services excluding volatile items and administered prices of goods by the government - registered an increase of 3.4 per cent in July.
Compared with other countries in South-east Asia, Malaysia's July inflation rate remained lower than Thailand (7.6 per cent), the Philippines (6.4 per cent) and Indonesia (4.9 per cent). However, Malaysia's inflation rate was higher than China, which recorded an increase of 2.7 per cent in July, mainly driven by higher food prices as well.
Given the rising inflation rate in Malaysia, economists Julia Goh and Loke Siew Ting from UOB Global Economic and Market Research expect Bank Negara Malaysia to increase the overnight policy rate by 25 basis points to 2.5 per cent at the central bank's next monetary policy meeting in September.
"There were signs of broadening second-round effects on inflation from higher global commodity and non-commodity prices as well as labour shortages," said the research firm in a report on Monday.
UOB also raised its full-year inflation estimate to 3.5 per cent, from 3 per cent previously, and this has yet to factor in the impact of the new targeted fuel subsidy mechanism that is currently under pilot testing since July.
"A combination of factors - including (low) base effects a year ago, still high commodity prices, persistent currency weakness and intensifying cost pass-through effects - will continuously keep headline inflation above 4 per cent levels for the rest of the year," the report said.