KUALA LUMPUR (Feb 11): Bank Negara Malaysia (BNM) governer Tan Sri Nor Shamsiah Mohd Yunus said on Friday (Feb 11) that the nation is “nowhere near” the risk of very-high inflation — because upward consumer price pressure had mainly been due to Covid-19-pandemic-driven supply-chain disruptions — as demand recovers in tandem with improving economic conditions due to Covid-19 vaccination progress.
Nor Shamsiah's reminiscences of very-high inflation drew attention to the 8.5% year-on-year rise in the Consumer Price Index (CPI) in 2008, when crude oil prices rose to about US$100 a barrel.
Speaking on Friday at a virtual press conference in conjunction with the announcement of Malaysia's fourth quarter of 2021 (4Q21) and full-year economic performance, she said: “We (BNM) will remain vigilant of all the ongoing developments in demand and cost pressures, and will continue to actively engage with industry players to examine evolving price dynamics closely as our economic conditions improve."
She said Malaysia's situation is different from the US, which is experiencing “the culmination of an acute supply disruption and strong demand pressures”.
“There is also continued slack in our economy and the job market. As such, core inflation is expected to remain modest,” Nor Shamsiah explained.
BNM said in a statement on Friday that Malaysia's CPI increased 3.2% in 4Q21 from a year earlier.
For 2021, average inflation was 2.5%, compared to a deflation of 1.2% in 2020, the central bank added.
Nor Shamsiah's inflation remarks on Friday followed news reports, quoting the US Bureau of Labor Statistics, that the US CPI rose 7.5% in the 12 months ended January 2022 from a year earlier.
"It was the steepest annual price increase since February 1982 and worse than economists had forecast," CNN reported on Friday.
Such sentiment has generated anticipation of US interest rate hikes to combat inflation.
At the BNM press conference, Nor Shamsiah said the central bank expects Malaysia's economic growth to be higher in 2022 and that the CPI to be moderate at a level "closer to its long-term average in 2022”.
"We conduct our monetary policy premised on us achieving price stability and sustainable growth in Malaysia.
"We will assess global developments through the lens of whether they affect the balance of risk to our inflation and [economic] growth outlook," she added.