KUALA LUMPUR: Malaysia's headline inflation is expected to average between 2.2 per cent and 3.2 per cent in 2022, amid higher underlying inflation, according to Bank Negara Malaysia .
The central bank, in its Economic and Monetary Review released today, said fuel inflation, which contributed to higher inflation in 2021, was expected to moderate in 2022.
"While high input costs are projected to exert some pressures on selected fresh food prices, these pressures will be partly mitigated by price controls," Bank Negara said.
Meanwhile, core inflation is expected to average higher between 2.0 per cent and 3.0 per cent in 2022 due to stronger demand conditions amid lingering cost pressures.
For most items in the core Consumer Price Index (CPI) basket, the price pressures in 2022 will largely reflect a normalisation in prices after a period of subdued demand and reduced profit margins during the pandemic.
However, the extent of upward adjustments in core inflation would remain partly contained by the continued slack in the economy and labour market, the bank said.
"The upside risks to the overall inflation outlook stem mainly from cost-push factors, such as a more persistent uptrend in input costs and prolonged global supply chain disruptions, which geopolitical tensions and lockdowns in China could exacerbate," it added.
Bank Negara said downside risks to the outlook mainly reflected factors that could precipitate a weaker recovery in economic conditions, leading to more benign price pressures.