KUCHING: Malaysia’s inflation rate accelerated to a 23-month high of three per cent year-on-year (y-o-y) in March, compared with 2.9 per cent in February.
HIGHER PRICE PRESSURES: File photo shows an elderly woman as she shops at Wegmans Foods store in Fairfax, Virginia. AmResearch says that besides the emerging markets, developed countries are also experiencing higher price pressures, with US inflation at 2.7 per cent in March, the highest since December 2009. — AFP photo
According to the economic update report by AmResearch Sdn Bhd (AmResearch), while the rate was lower than the average market expectation of 3.1 per cent, the rise is in line with its view of inflation trending upwards in the short term. On month-on-month (m-o-m), prices rose 0.1 per cent in March compared with 0.5 per cent in February.
The research house pointed out that the y-o-y increase was mainly driven by increases in global food prices along with subsidy reductions on petrol and sugar. This was reflected by the index for food and non-alcoholic beverages, which jumped 4.7 per cent.
Meanwhile, AmResearch highlighted that the cost of transportation rose to 4.6 per cent, the highest rate of increase since November 2008, reflecting the recent hikes in petrol prices.
“RON95 petrol was raised five sen per litre to RM1.90 per litre on December 3, 2010, while RON97 was raised three times with a 10 sen per litre increase each on January 4 and February 1, followed by a 20 sen per litre increase on April 1. Currently, RON97 costs RM2.70 per litre,” said the research house.
On another note, AmResearch stated that inflation in emerging markets continued to rise, as India and China recorded significantly high inflation numbers in March.
“This will likely encourage central banks across the region to continue with aggressive interest rate hikes in order to cool down the economy,” the research house added.
AmResearch also stated that apart from emerging markets, developed countries were also experiencing higher price pressures, with US inflation at 2.7 per cent in March, the highest since December 2009. Inflation in the eurozone had also surged to 2.7 per cent in March, the highest since October 2008.
Moving ahead, the research house expected inflation to be between three per cent and 3.5 per cent this year, accelerating faster in the second half of the year as global economic growth picks up.
“At 2.75 per cent, the OPR (overnight policy rate) is at an accommodative level to promote growth and curb further inflationary pressures creeping into the economy. Although a steady interest rate environment may be desirable for economic activities in the current environment, we maintain our view of a 25bps (basis points) hike sometime in 2H11 (second half of this year),” AmResearch affirmed.