KUALA LUMPUR: The country’s headline inflation is projected to average between 2.2% and 3.2% in 2022 amid higher underlying inflation.

       According to Bank Negara’s Economic and Monetary Review 2021 released today, fuel inflation, which contributed to higher inflation in 2021, is 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.

       Meanwhile, core inflation is expected to average higher between 2.0% and 3.0% in 2022 due to stronger demand conditions amid lingering cost pressures.

       For most items in the core CPI basket, the price pressures in 2022 would largely reflect a normalisation in prices after a period of subdued demand and reduced profit margins during the pandemic.

       However, the central bank said the extent of upward adjustments in core inflation will remain partly contained by the continued slack in the economy and labour market.

       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.

       Meanwhile, downside risks to the outlook mainly reflect factors that could precipitate a weaker recovery in economic conditions, leading to more benign price pressures.