[KUALA LUMPUR] Malaysia’s inflation rate held steady at 4 per cent in November, unchanged from the month before and just slightly higher than the 3.9 per cent forecast by a group of 17 economists in a recent Reuters poll.

The consumer price index (CPI) for November was 129, compared to 124 in the same month a year ago, said the Department of Statistics Malaysia (DOSM) on Friday (Dec 23).

On a monthly basis, the CPI increased 0.3 per cent from October to November. From January to November, the inflation rate was 3.4 per cent, up from 2.3 per cent over the same 11-month period last year.

DOSM said the price increases of food and non-alcoholic beverages remained the main contributors to the rise in inflation, with the prices of this group going up to 7.3 per cent, from 7.1 per cent in October.

Restaurants and hotels were another major contributor with an increase of 7 per cent in November, from 6.8 per cent in the previous month.

There was a slower increase seen for the transport group (5 per cent in November, from 5.2 per cent in October), as well as furnishings, household equipment and routine household maintenance (3.8 per cent in November, from 4.1 per cent in October).

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In November, prices rose for 441 out of 552 items in the index, or about 80 per cent. Among these, the prices of 60 items increased by more than 10 per cent.

Core inflation – which excludes volatile items and those with government-administered prices – was 4.2 per cent in November, slightly higher than the 4.1 per cent seen in October.

Barclays economist Brian Tan observed that the sequential momentum remains relatively strong, and he expects the core inflation to hit 4.3 per cent in December before moderating in 2023.

“Our projections suggest the positive output gap will likely begin to narrow in the first quarter next year, but it is unclear whether the slowdown will be sufficiently visible by Bank Negara’s policy meeting in March,” he said in a note on Friday.

Malaysia’s CPI has eased since September, and economists expect the inflation rate to continue to moderate next year due to declining commodity prices and a diminishing low-base effect.

Geoffrey Williams, economics professor and dean of the Institute of Postgraduate Studies at the Malaysia University of Science and Technology, said the continuation of the government’s price control mechanism will help to lower inflation.

“For instance, the freeze on utility tariffs will hold down price rises and bring down the rate of inflation,” he told The Business Times.

CGS-CIMB Securities’ head of economics Nazmi Idrus shared the same view and expected the new government under Prime Minister Anwar Ibrahim to continue to try and contain inflation, in line with its pledge to prioritise dealing with cost-of-living issues.

He lowered the CPI projection for 2023 to 3 per cent, from 3.3 per cent previously, while Williams estimates that next year’s inflation will fall in the 2-2.5 per cent range.

On the central bank’s monetary policy, Williams said the easing inflation along with lower global prices would allow Bank Negara to pause its interest rate hikes for the time being.

CGS-CIMB, however, maintained its forecasts of at least two more interest rate hikes in 2023 – a 25 basis points increase for each round – as the central bank had earlier warned that inflationary pressures were likely to remain next year.

“The recent strengthening of the ringgit may ease some pressure for the central bank to remain aggressive, we think persistent inflationary pressure and normalised economic performance may take precedence,” said Nazmi.

Compared to other countries in the Asia-Pacific region, Malaysia’s November inflation was lower than South Korea (5 per cent), the Philippines (8 per cent), Thailand (5.6 per cent) and Indonesia (5.4 per cent).