KUALA LUMPUR: The country's headline and core inflation are expected to ease but remain elevated throughout the year, said Bank Negara Malaysia governor Tan Sri Nor Shamsiah Yunus.
Nor Shamsiah said headline and core inflation were expected to moderate over the course of 2023, albeit remaining higher than pre-pandemic levels, averaging between 2.8 per cent and 3.8 per cent for the year as a whole.
"While cost pressures have eased in line with lower global commodity prices, core inflation will remain at elevated levels amid firm demand conditions and continuing improvements in the labour market," she said at a press conference on Malaysia's first quarter performance here today.
Nor Shamsiah said the outlook had also accounted for the gradual rationalisation of subsidies, particularly the revision in electricity surcharge for selected industry participants.
"The balance of risk to inflation remains tilted to the upside, and is highly subject to domestic policy changes on subsidies and price controls, financial market developments, as well as risks to global commodity price from geopolitical conflicts and adverse weather events like El Nino," she said.
In line with the easing cost environment, Nor Shamsiah said headline inflation was lower, averaging at 3.6 per cent for Q1 2023 from 3.9 per cent in the previous quarter.
Much of this downtrend was driven by supply factors, namely lower RON97 prices, which contributed around two-thirds of the decline during the first quarter.
"While core inflation moderated to 3.9 per cent during the quarter from 4.2 per cent previously, it remains elevated relative to the historical norm of around 2.0 per cent. Core inflation is more indicative of underlying demand pressures.
"Prices on core items may stay the same or increase, even as costs moderate, as demand remains strong," she added.