Day: March 30, 2022

KUALA LUMPUR— Malaysia’s headline inflation is forecast to remain manageable this year, averaging between 2.2 per cent and 3.2 per cent (2021:2.5 per cent) while fuel inflation, which underpinned the higher headline inflation in 2021, is projected to moderate in 2022, Bank Negara Malaysia (BNM) said.

The central bank said this is despite expectations of higher global oil prices, given the assumption that the price ceiling on domestic retail fuel prices would remain in place throughout the year.

“High input costs from rising non-energy commodity prices, however, are expected to exert some pressures on selected fresh food prices, particularly in the first half of the year,” BNM said in its Economic and Monetary Review 2021 released Wednesday.

Nevertheless, the central bank said this would continue to be partly mitigated by the price controls on selected food items.

Of note, for the second half of 2022, the base effect from electricity prices is projected to contribute to a temporary spike in headline inflation, particularly in the third quarter of 2022, BNM said.

Meanwhile, underlying inflation, as measured by core inflation, is expected to average higher between 2.0 and 3.0 per cent in 2022 (2021: 0.7 per cent), driven by the improvement in demand conditions amid lingering cost pressures.

“For most items in the core Consumer Price Index (CPI) basket, the price pressures in 2022 largely reflect a normalisation after a period of subdued demand and reduced profit margins during the pandemic.

“However, prices for some CPI segments, such as food away from home and some high-touch services, are projected to exceed their pre-pandemic trend due to the confluence of stronger demand and the high cost environment,” BNM said.

Nevertheless, the extent of upward adjustments to core inflation would remain partly contained by the continued slack in the economy and labour market.

On the overall inflation outlook, BNM said it would remain susceptible to upside risks, particularly from cost-push factors.

“These include a more persistent uptrend in input costs due to higher global commodity prices and prolonged disruptions to global supply chains, which could be exacerbated by geopolitical tensions and lockdown in China.

“Higher input costs could also induce a larger pass-through of costs to consumer prices, should businesses expect them to be more permanent in nature,” the central bank said.

Moreover, there is the risk that excessively high global energy prices could lead to adjustments to domestic retail fuel prices that have remained unchanged since March 2021.

As for the downside, risks mainly reflect factors that could precipitate a weaker recovery in economic condition, leading to more benign price pressures.

Source: NAM NEWS NETWORK

KUALA LUMPUR— Malaysian Palm Oil Council (MPOC) said Malaysia is ready to help and cater the needs on sustainable palm oil to substitute the sunflower oil amid an acute shortage in Iceland supermarket.

“Sustainable palm oil is a viable substitute for sunflower oil, and while the war in Ukraine impacts supply and inevitably food prices, Malaysia stands ready to help,” MPOC chairman Larry Sng Wei Shien said in a statement Wednesday.

On Monday, a United Kingdom broadsheet Daily Telegraph reported that the supermarket company Iceland Foods Ltd had been forced to reverse a ban on palm oil from its products and shelves amid an acute shortage of sunflower oil, a staple ingredient in various food products.

In 2018, Iceland supermarket pledged to remove palm oil from all its own-brand foods due to the allegation that palm oil is one of the major drivers of deforestation.

Sng said Iceland Foods’ campaign against palm oil has always ignored the industry’s shift towards sustainability, relying instead on outdated stereotypes to generate headlines.

“The reality is that palm oil is more efficient than sunflower oil, so we can meet British and European demand using less land and achieve our ambition of 100 per cent sustainable palm oil in Europe in the process,” he added.

Source: NAM NEWS NETWORK

BANGKOK— The Bank of Thailand (BoT) has kept its policy rate at a record low of 0.5 per cent to help facilitate a sustained economic recovery.

BoT Monetary Policy Committee (MPC) today voted unanimously to maintain the benchmark interest rate at the same level since May 2020.

The central bank also lowered its 2022 economic growth forecast from the 3.4 per cent made in December to 3.2 per cent.

In a statement, MPC secretary Piti Disyatat said the committee assessed that the Thai economic recovery would remain intact this year and in 2023, despite impacts from sanctions against Russia which had led to higher energy and commodity prices and a slowdown in external demand.

He said average inflation for full-year 2022 would exceed the target range but was expected to decline and return to target in early 2023 with energy and food prices stabilising.

“The committee assesses that recent increases in inflation have stemmed primarily from cost-push factors, while demand-pull inflationary pressures have remained subdued. The committee thus voted to maintain the policy rate at this meeting,” he said.

Meanwhile, the central bank cut this year’s economic growth projection to 3.2 per cent amid the impact of the Omicron variant outbreak on economic activities.

“Sanctions against Russia have pushed the cost of goods higher but will not derail the overall recovery path. Nonetheless, downside risks to growth remain, including prolonged shortages of raw materials in certain industries and the impact of higher prices on living costs for households and production costs for businesses, particularly toward vulnerable groups.

“The committee (MPC) will closely monitor developments in the abovementioned situations closely,” BoT said.

On exchange rates, Piti said the baht had depreciated relative to the US dollar due to concerns over the Russia-Ukraine war and the expectation of monetary policy normalisation in advanced economies.

“The committee will closely monitor developments in both global and domestic financial markets, and continue to expedite the new foreign exchange ecosystem, particularly through supporting small and medium enterprises in hedging against risks from exchange rate volatility,” he said.

Piti said MPC would closely monitor key factors affecting the economic and inflation outlook, namely global energy and commodity prices, higher cost pass-through, and geopolitical risks that could elevate and pose uncertainties in the period ahead.

“The committee stands ready to use appropriate monetary policy tools if necessary,” he said.

Source: NAM NEWS NETWORK