KUALA LUMPUR: Malaysia's core inflation, which excludes more volatile food and fuel price data, surges to a new record high again, but headline inflation continues on moderating trend, MIDF Research said.
Reflecting underlying domestic demand, the core inflation rate hit a new peak point at 4.2 year-on-year (y-o-y) in November (October: 4.1 per cent y-o-y).
Non-food inflation edged up slightly to 2.5 per cent y-o-y while food inflation rose to a new record high at 7.3 per cent last month.
MIDF Research expects headline inflation to moderate next year backed by domestic demand firming.
In the environment of elevated global commodity prices, inflationary pressure in Malaysia is affected by higher food inflation.
The firm expects food price growth to hit 5.5 per cent this year, which is also attributable to the depreciation of the ringgit.
"With domestic demand firming, we project headline inflation to average 3.2 in 2022," MIDF Research said today.
The firm said on a sequential month basis, the country's core prices still recorded 0.4 per cent month on month (mom) increase.
"We opine the strong inflation trend in Malaysia is highly driven by robust consumer demand while indicators for cost inflation have eased in recent months.
"With this upbeat momentum, we believe Bank Negara Malaysia is likely to raise the Overnight Policy Rate by another 25 basis point to 3.00 per cent in the first Monetary Policy Committee meeting next year in January," it said.
MIDF Research said fuel price inflation descended to 21-month low at 2.6 per cent y-o-y and contracted by 0.1 per cent m-o-m in November 2022, recording five-straight months of m-o-m decline.
This was in tandem with normalisation of commodity prices, it said.
"We believe the coalition government will keep the current fuel subsidy mechanism status quo at least for 2023. Hence, we foresee fuel inflation to stay on decelerating trend and would drag on overall inflationary pressure," it said.
MIDF Research said supply-push factors on inflation were expected to soften next year, among others underpinned by the expected appreciation of the ringgit, moderation in food prices, further easing in global supply chain pressure and normalising commodity prices.
"Post-15th General Eelection, Malaysia's inflation outlook is much clearer for next year as we expect the coalition government is very likely to keep the current fuel-subsidy mechanism status quo.
"Hence, headline inflation is predicted to average at 2.3 per cent for 2023," it added.