KUALA LUMPUR, Sept 27 — Kenanga Investment Bank Bhd said Malaysia’s Consumer Price Index (CPI) inflation will likely rise in the fourth quarter of 2021 (Q4 2021) and hover between 2.3 per cent and 2.7 per cent amidst the phased reopening of the economy.
The research house said most of the restrictions on economic and social sectors are expected to be lifted as early as mid-October as Malaysia prepares for the transition towards the Covid-19 endemic phase.
“This may cause a surge in consumer spending due to the release of pent-up demand and could trigger an increase in prices,” it said in a note today.
On the outlook for the National Recovery Plan (NRP), it said more states are expected to shift into Phase Four in the near term, putting more upward pressure on prices.
“As all states except Kedah have moved into the NRP’s Phase Two and above, we expect that the domestic economic recovery may start to take hold in Q4 2021,” it said.
It added that Bank Negara Malaysia is expected to keep the overnight policy rate unchanged at 1.75 per cent at its next meeting in November, backed by its commitment to utilise its policy levers as appropriate to foster enabling conditions for a sustainable economic recovery.
Meanwhile, CGS-CIMB opined that the monetary policy would remain accommodative until mid-2022 to aid economic recovery and foresee interest rate normalisation to begin only in the second half of next year.
“With economic growth remaining the main focus of fiscal and monetary policy, we do not expect any regressive tax measures such as the Goods and Service Tax to be rolled out in the upcoming budget, suggesting inflation could remain well contained going into 2022,” it added.
Last Friday, the Department of Statistics Malaysia (DoSM) reported that Malaysia’s CPI had increased for the seventh consecutive month in August 2021, rising by 2.0 per cent year-on-year to 122.5 per cent. — Bernama