KUALA LUMPUR – CGS CIMB expects headline inflation to decelerate further for the rest of the year, as the full movement control order will likely keep the economy operating below potential for an extended period of time, warranting an accommodative monetary policy.
Reiterating its annual inflation forecast for 2021 at 3.1% year-on-year (y-o-y), the research firm also expects Bank Negara Malaysia to maintain the overnight policy rate at 1.75% for the second half of this year.
“With base effects peaking for headline inflation in April, we expect gradual convergence with the trend in core inflation, which remains subdued,” it said in a research note today.
Meanwhile, Public Investment Bank said the consumer price index (CPI) is projected to rebound in 2021, underpinned by the turnaround in oil prices driven by the Organisation of the Petroleum Exporting Countries and allies’ uninterrupted supply cut arrangements, among others.
“This will be further boosted by a recovery in sentiment following the rapid rollout of the Covid-19 vaccination programme, especially in the second half of 2021,” it said in a separate note.
It said the CPI will also get a boost from the full implementation of seven fiscal stimulus packages worth RM380 billion, equivalent to about 23% of gross domestic product.
The projected addition of at least 500,000 new jobs through the private-public initiatives will also bode well for the CPI.
“Accommodative interest rate environment that is expected to continue will also support demand, and therefore, the headline index.
“While the near-term outlook may be weighed slightly by reversion to Covid-19 containment measures, the longer-term upward trajectory is expected to be unchanged,” it said. – Bernama, June 28, 2021
