KUALA LUMPUR: The government is expected to introduce a managed floating mechanism for RON95 petrol priced between RM2.10 and RM2.40 per litre following the implementation of targeted subsidies, according to MIDF Research.
Meanwhile, for diesel, the market research firm expects its price to be based on market prices starting June this year.
In addition to the introduction of a managed floating price mechanism for RON95 petrol, MIDF Research also expects the government to provide cash assistance to eligible individuals based on data from the Central Database Hub (Padu).
"The targeted fuel subsidy is expected to be implemented as early as June 2024. Our speculation is that the government will introduce a managed floating price mechanism for RON95 at RM2.10 to RM2.40 per litre and provide cash grants to eligible individuals based on Padu data.
"For diesel, we expect the price to be based on market prices starting from June 2024 and beyond," it said in its second quarter market review 2024.
Meanwhile, MIDF Research said that the inflation rate is expected to hover above three per cent following the implementation of targeted fuel subsidies.
It said that the overall inflation rate is expected to be higher at 3.2 per cent as targeted fuel subsidies are likely to be launched as early as June 2024.
It said that the overall producer price index (PPI) is expected to be at 0.5 per cent for 2024 compared to -1.9 per cent in 2023.
"Therefore, non-food items inflation is expected to increase by 2.9 per cent while better domestic supplies and normal global commodity prices will drive food inflation lower at 3.7 per cent in 2024," it said.
Regarding the overnight policy rate (OPR), MIDF Research said that the domestic lending reference rate is expected to remain at 3.00 per cent, which remains supportive and accommodative.
It said that the focus of Bank Negara Malaysia's (BNM) monetary policy setting is to ensure sustainable growth momentum in the Malaysian economy.
It said that although external trade is expected to recover, the external environment remains challenging in 2024 amidst ongoing geopolitical tensions and potentially slow global growth.
"The domestic economic outlook is expected to remain resilient supported by stable domestic demand. However, we believe that the stability of core inflation rates and the challenging external environment may influence BNM to maintain the OPR at the current level throughout 2024.
"The decision will be subject to the stability of economic growth, the rate of price increases, and ongoing progress in macroeconomic conditions, particularly the continued recovery in the labour market and increasing domestic demand," it said.
From a medium-term perspective, MIDF Research said that normalising the base rate is necessary to avoid risks that could affect the stability of future economic prospects such as continued high inflation and sustained increases in household debt.