PETALING JAYA: Upward inflationary pressure is anticipated for the rest of the year.

       The scenario is fuelled by high commodities and energy prices and supply disruptions, among others, according to economists.

       AmBank Group chief economist Anthony Dass said there would be upward inflationary pressure for the rest of the year.

       Much of it would continue to come from cost pressures – high prices from commodities, raw materials and energy, supply disruptions and transportation charges from higher freight charges.

       “However, our inflation outlook for 2022 is between 2.8% and 3% with the job market improving and unemployment projected around 4.1% for 2022. Also, we foresee potential transfer pricing to take place from the producers to end users.

       “Overall, the upward pressure on inflation will be contained via subsidies.

       “This would provide adequate room for Bank Negara to avoid acting aggressively on its rate policies.

       “A 25 basis points (bps) hike in July is envisaged with the aim to address the interest rate differential and provide some buffer for the ringgit against the US dollar,” he said.

       “Any further rate hikes by the central bank will be driven by data and the external environment.

       “Based on our current assessment, there is only a 40% chance of it raising rates in September this year,” said Dass, who is also a member of the Economic Action Council Secretariat.

       However, the “underlying inflation” which is the retail selling prices of goods and services are rising much faster than the CPI inflation, he said, noting that this would hurt the households buying abilities.

       Headline inflation remained unchanged for the second straight month.

       In March, the headline inflation grew at the same pace as in February by 2.2% year-on-year (y-o-y) to bring the average first quarter of 2022 to 2.2% y-o-y.

       Core inflation (excludes volatile and administered goods and services), however, rose from 1.8% y-o-y to 2% y-o-y to average at 1.8% in the first quarter of the year.

       CGS-CIMB Research said the weakening ringgit against the US dollar could add to cost pressures.

       “The positive correlation between crude oil price and ringgit has weakened significantly, as concerns over rising global inflation speeding up monetary policy tightening (especially in the United States and slowdown in the global economy take centre stage.

       “As a result, the ringgit has depreciated by 2% month-to-date and 2.9% year-to-date April 21, 2022, versus the US dollar due to overall strengthening of the greenback.

       “With surging raw material costs already eating into profit margins, producers have less room to absorb the impact of a weakening ringgit/US dollar (for importers) and an imminent 25% hike in monthly minimum wage to RM1,500 from May 1.

       “That said, the United States makes up about 6.3% of Malaysia’s imports, while the exchange rates with other major import partners, especially China (at 26% share), had seen less volatility. This implies the rise in imported inflation could be limited to certain goods and services,” the research house noted.

       CGS-CIMB Research said despite the rise in core inflation, the increase is at the low end of the central bank’s 2022 forecast range of 2% to 3% y-o-y. In addition, it said the risk of a global economic slowdown could be an added factor for a rate normalisation ahead.