KUALA LUMPUR: RHB Investment Bank Bhd (RHB IB) has maintained its headline consumer price index (CPI) inflation forecast at 3.4 per cent year-on-year (y-o-y) for 2022 and expects the inflation rate to soften slightly to 3.0 per cent in 2023.
The investment bank made the forecast after observing Malaysia’s CPI inflation, which stood at four per cent y-o-y in November 2022, moving slightly higher than the 3.9 per cent y-o-y growth by Bloomberg consensus estimates.
In a note today, it said the inflation momentum would stay robust in the near term, and demand-side pressures on core CPI inflation would likely remain intact in the next few months, as its proprietary model suggests that consumer spending would remain robust in the first half of 2023, despite a slower momentum.
“Based on recent developments, we see limited risks of a significant deterioration in labour market conditions, (and) we expect slight relief from the supply side amidst softening commodity prices in recent months,” it said.
According to data by the Department of Statistics Malaysia released earlier today, core inflation registered an increase of 4.2 per cent y-o-y in November 2022 versus 4.1 per cent y-o-y in the previous month.
Moving forward, RHB IB expects the trajectory of inflation to be driven by three key factors, namely the momentum of economic growth, the ringgit strength, and the movement of commodity prices.
It said following the changes in the government regime, it would keep an eye on any potential changes in fiscal and monetary policies and their impact on the inflationary trajectory.
“Potential adjustment to the subsidy programme towards a more targeted approach is not completely ruled out yet, and we expect more clarification following the (retabling of) Budget 2023 (by February),” it added.
On the overnight policy rate (OPR), RHB IB maintained its forecast at the range of 3.0-3.5 per cent for 2023, as it expects robust domestic demand and negative real interest rates to fuel core inflation pressures.
It also said that more rate hikes by the United States Federal Reserve imply that OPR normalisation may continue in upcoming months. - Bernama
