Malaysia’s inflation eases to 3.3% in April, lowest in 11 months

[KUALA LUMPUR] Malaysia’s inflation rate moderated to 3.3 per cent year on year in April, the lowest in 11 months, as prices in the transport segment grew more slowly, said the Department of Statistics Malaysia (DOSM) on Friday (May 26).

The inflation rate was in line with the median forecasts of 22 economists in a Reuters poll. In March, the consumer price index (CPI) rose 3.4 per cent.

On a monthly basis, the CPI increased marginally at 0.1 per cent from March to April. For the first four months of 2023, the inflation rate was 3.5 per cent, up from 2.2 per cent in the same period last year.

In terms of general price level, the index points in April were still at a higher level of 130, compared with 125.9 in the same month last year.

The price growth of the transport segment eased to 2.3 per cent in April, from 2.4 per cent in March.

DOSM chief statistician Mohd Uzir Mahidin said that although the slower growth of the transport segment partly offset the overall inflation growth, other segments continued rising. For example, food and beverages recorded a higher growth of 6.3 per cent; the restaurant and hotel segments grew 6.6 per cent.

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Core inflation – which excludes volatile items and those with government-administered prices – moderated to 3.6 per cent in April, lower than 3.8 per cent in March.

In April, prices rose for 437 out of 552 – nearly 72 per cent – of the items in the index. Among these, the prices of 32 items went up by more than 10 per cent, while the prices for 76 items fell.

“To a certain extent, the price of administered items eased the inflation rate in April,” said Mohd Uzir.

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Malaysia’s inflation has moderated after having peaked at 4.7 per cent last August, with the government having introduced measures such as price controls on certain items.

In view of the softening of price pressures in April, economists said the lagged effects of past rate hikes have gradually emerged. They expect Malaysia’s inflation rate to continue to moderate.

Barclays senior regional economist Brian Tan expects more visible declines in Malaysia’s CPI readings as the base effects of the Ukraine war-driven rise in global food and energy prices fade from the second quarter this year.

Barclays maintained its full-year forecast for the CPI at 2.6 per cent in 2023, slightly below Bank Negara’s forecast range of 2.8 per cent to 3.8 per cent.

UOB senior economist Julia Goh said Malaysia’s core inflation extended its downtrend and eased more quickly than headline inflation in April, reflecting a cautious consumer sentiment in light of heightened uncertainty gripping the global and domestic economy.

“The existing price controls and fuel subsidies are also expected to further contain the extent of upward pressures to inflation in the near term,” she added.

Goh therefore does not expect another round of rate hikes this year, in view of manageable inflation expectations, weaker economic growth momentum and the peaking of global interest rates.

Nevertheless, RHB Research economist Chin Yee Sian said core inflation pressures would likely persist in the near term, despite easing headline inflation as domestic demand remains robust.

RHB stood by its view that there would be one more rate hike this year, which will bring the overnight policy rate (OPR) to 3.25 per cent from the current 3 per cent.

Malaysian central bank governor Nor Shamsiah Mohd Yunus earlier warned that the balance of risk to inflation remains tilted to the upside and will be affected by domestic policy changes on subsidies, price controls, financial market developments and global commodity prices.

Bank Negara Malaysia unexpectedly raised the overnight policy rate by 25 basis points to 3 per cent early this month, in view of resilient domestic growth prospects.

Malaysia’s inflation rate has remained lower than in some markets in the Asia-Pacific: the Philippines (6.6 per cent), Indonesia (4.3 per cent) and South Korea (3.7 per cent). It was also lower than in the eurozone (7 per cent) and the United States (4.9 per cent).