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Inflation Malaysia hits a new high! How high?

inflation

Inflation Malaysia hits a new high! How high?

No one can run away from inflation

Everyone is worried about inflation, right? Well, nearly everyone except for those whose earnings are running faster than the inflation rate as well as those whose personal inflation is just lower than the national average. By the way, it’s possible yeah. If the price of a typical fish is expensive and you switch to a cheaper fish type, the inflation can be negative yeah. Anyway, that’s another story. Now, it’s been announced that inflation Malaysia is up and it’s a new record high!

Article in nst.com.my MIDF Research said that Malaysia’s core inflation, which excludes more volatile food and fuel price data, surges to a new record high again, but headline inflation continues on moderating trend.

Reflecting underlying domestic demand, the core inflation rate hit a new peak point at 4.2 year-on-year (y-o-y) in November (October: 4.1 per cent y-o-y). 

Non-food inflation edged up slightly to 2.5 per cent y-o-y while food inflation rose to a new record high at 7.3 per cent last month.

MIDF Research expects headline inflation to moderate next year backed by domestic demand firming.

The firm expects food price growth to hit 5.5 per cent this year, which is also attributable to the depreciation of the ringgit. 

“With domestic demand firming, we project headline inflation to average 3.2 in 2022,” MIDF Research said today. 

“We opine the strong inflation trend in Malaysia is highly driven by robust consumer demand while indicators for cost inflation have eased in recent months. 

“With this upbeat momentum, we believe Bank Negara Malaysia is likely to raise the Overnight Policy Rate by another 25 basis point to 3.00 per cent in the first Monetary Policy Committee meeting next year in January,” it said. 

Read the full article here: Article in nst.com.my

Inflation as a reflection of the domestic demand

In the article, it said that the ringgit was depreciating, thus this pushed the inflation up. If we read just this one line, we think the ringgit is the worst in the world. By the way, it is definitely not! Whether it’s versus AUD, Japanese Yen, British Pound or even Euro, we are NOT. Here’s the earlier article: Ringgit versus major currencies However, please note that MOST trades are done using US$. Thus, if Ringgit depreciates against USD, then it will cause inflation.

Just need to remember that in the same article, MIDF mentioned that the strong consumer demand is also driving up the inflation trend yeah. This is a good reflection that people have money and could still spend it.

Inflation as a reflection of the supply side

When there is robust demand, the supply side will have to keep up soon. With prices increasing, many would want to quickly supply those goods and services demanded. Thus, this meant more hirings and thus more economic activities. This augurs well for the economy too yeah. This is why when inflation is not due to some financial crisis or any crisis, inflation will reflect demand and soon, inflation will drive supply side too. Let’s hope this continues on a manageable scale. Yes, it does seem that Bank Negara Malaysia will increase the rates again.

Happy understanding and hoping that all are able to stay above the inflation rate.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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