The main source of price pressure will come from cost-push inflation as the ongoing supply constraints resulted in rising input, analysts say. — Bernama photo
KUCHING: Analysts have maintained their forecast for consumer price index (CPI) inflation to be at 2.3 per cent this year, noting that the main source of price pressure will come from cost-push inflation as the ongoing supply constraints resulted in rising input.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) recapped that Malaysia’s headline CPI inflation moderated further to two per cent year on year (y-o-y) in August 2021, compared to 2.2 per cent y-o-y in July 2021.
This was exactly in line with MIDF Research’s expectation.
“We maintain our forecast for CPI inflation to be at 2.3 per cent this year (2020: -1.1 per cent y-o-y),” MIDF Research said.
“The main source of price pressure will come from cost-push inflation as the ongoing supply constraints resulted in rising input.
“The latest producer price index (PPI) inflation continued to be higher than CPI inflation, signalling continued pressure on suppliers to pass some of the cost increases to end-consumers.”
The research arm expects the pressure on cost will continue because the disruptions from the global pandemic continued to cause supply chain challenges.
“Meanwhile, the high commodity and crude oil prices will support inflation in transport prices, although the pace of increase is limited by the cap imposed on domestic petrol and diesel prices.
“Other measures such as cap on cooking oil prices and discount on electricity bills will also contain the inflationary impact on consumer prices.”
Going forward, MIDF Research foresees inflation will stabilise around the current level; the diminishing base effect will be balanced by rising cost and recovering demand, as domestic spending is expected to pick up following the relaxation of lockdown restrictions and recent improvement in the local Covid-19 situation.