“The lower inflation figures show that the policies of Bank Negara as well as the government are working but there are also global factors, especially oil prices, which are around half the level now than they were last year. He expects inflation to continue to slow towards 2.5% in the next month or so and to remain low for the rest of the year. University of Science and Technology economics professor Geoffrey Williams also concurred that lower inflation figures ease the pressure on Bank Negara to raise the OPR. “This is given the easing of inflation amid weakening growth in both the global and domestic economy,” said Yeah, who is also one of the recently-appointed finance advisers to Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim. “Nevertheless, there is a strong probability that the overnight policy rate (OPR) will remain unchanged for the rest of the year. “With persisting core inflation, central banks – including Bank Negara – will therefore remain vigilant of inflation pressures and are likely to maintain a hawkish stance. “With global demand decelerating more strongly as reflected in Malaysia’s export slowdown, global commodity prices – especially energy – are projected to weaken, leading to core inflation exceeding headline inflation. Sunway University economics professor Dr Yeah Kim Leng told StarBiz that the decline in the headline inflation by a sizeable 0.5% in May is indicative of the lowering of food prices and energy items, which make up the volatile components in the CPI basket. While this bolsters hopes that the monetary tightening policies undertaken by Bank Negara are bringing price rises under control, economists remain split on their forecast of the central bank’s decision to implement further rate hikes, ahead of the central bank’s upcoming monetary policy committee (MPC) meeting on July 5 to July 6. Headline inflation rose at a slower rate of 2.8% year-on-year or y-o-y (April: 3.3%) and core inflation eased slightly to 3.5% y-o-y (April: 3.6%) last month. PETALING JAYA: The local economy received its much needed reprieve when the consumer price index (CPI) showed signs of cooling in May.
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