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Malaysians And Inflation: Are We Going To Feel The Pinch, Pinch-ier?

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In April 2022, our national inflation rose to 2.3%, which exceeded the average inflation of 1.9% in Malaysia from the period April 2011 to April 2022. And just recently, it was reported that inflation rose to 2.8% in May against consensus of 2.7%. A vast development indeed. In addition, US Federal Reserve’s (Fed) move to raise the interest rate hike by 75 bps on 15 June 2022 had alarmed all quarters over the world on what could possibly be coming next – big inflation. However, what does all these means? Especially to the people out there?

Generally, if most people do not understand what the numbers above mean, they do know one thing – they are feeling the pinch from the price hike of basic necessities, which has begun trickling the wallets of every household. From there, they knew and sensed that the inflation period is here. Not very surprising but not pleasant either, inflation is to stay persistent this time around.

In concurrence with the recent development, Mr Jason Wong, Research Manager of FSMOne Malaysia commented: “On one hand, inflation is reducing the purchasing power of consumers. On the other hand, rising interest rates means that consumers are “forced” to absorb these rising borrowing costs. These are double whammies for consumers which would lead to dwindling disposable income while wages and salaries are hardly changed.”

“Nevertheless, Bank Negara Malaysia’s move through its raise of Overnight Policy Rate (OPR) in May 2022 by 25 bps to 2.00% is commendable as the central bank is being proactive to stave off rising inflation in the country. At the same time, we believe this move will cushion some of the negative impact on the Malaysian Ringgit caused by the Fed’s recent aggressive interest rate hikes.”

“The Research Team at FSMOne foresees that the central bank will make another 3 more 25 bps hikes to the interest rate during the remaining Monetary Policy Committee Meetings (MPCs) that are set to take place this year. We believe the central bank does not wish to make the mistake like Fed did, by hiking rates too slowly and letting inflation to spiral out of control. Hence, BNM stays abreast on this matter,” said Mr Jason Wong.

Translating this to the current daily living of majority of people, Jason further elaborated that the current economic situation has led to Hobson’s choice moves by the Government. “Government has started the removal of subsidies moderately. As the pandemic came along with the Ukraine-Russia war recently, where supply chains were disrupted and shortages increased, many household commodities prices have been soaring up. China’s lockdown at certain provinces also affected major productions of industrial parts that they supply to Malaysia and other countries. Domino effect took place and subsequently, our local production is delayed resulted from this and affected end users as well.”

“All factors combined and ramped up, these contributed to the increasing inflation in the country. Malaysian Government is now challenged to cope with the increasing cost of many commodities,” added Mr Jason Wong.

By 1 July, the prices of eggs and chicken are expected to increase from the current price, RM8.90 per kg. The Prime Minister recently announced that the new ceiling price for chicken will be announced by Agriculture and Food Industries Ministry (MAFI) soon. The price ceiling for bottled cooking oil weighing 2kg, 3kg and 5kg will also be removed on 1 July.

Based on these factors, it is foreseen that Malaysians will be facing greater food security issues as food items, even eating out, will be more expensive. In addition, food supplies could be tighter than before which may lead to limited quantity to be sold to consumers.

Besides food security, majority of Malaysians are challenged with job security in terms of disposable income, as basic items are getting more expensive and possibly overall wholesale, retail and trade sales would drop as an effect to this. Malaysians may have no other choice but to start cutting off expenses and tighten their budget to match with their monthly income.

Not to mention commodities and energy prices are also increasing higher than ever. RON97’s price is now lifted to RM4.84 per litre from RM3.94, which was last recorded on 11 May 2022. Although the price of RON95 has not changed from RM2.05 per litre, but it is foreseen that the price of RON95 may follow suit RON97 at certain point of time. It is just a matter of sooner or later. However, the water and electricity tariff maintain in Peninsular Malaysia.

What does this mean to all Malaysians? Are we expecting recession in the near future?

We are living in the bubble of protection from the Government today, with the lifting of fuel subsidies, like a balloon, as the air pressure increases internally, it’s only a matter of time, the rubber material gives way and pops.

About FSMOne Malaysia and iFAST Capital Sdn. Bhd.

FSMOne Malaysia (previously known as Fundsupermart.com Malaysia) is a Multi-Asset Investment Platform under iFAST Capital Sdn. Bhd. (“iFAST Capital”), established in Malaysia since 2008.

iFAST Capital is a holder of a Capital Markets Services Licence (CMSL) and is licensed by the Securities Commission to deal in securities (includes Stocks & ETFs, unit trusts and OTC bonds), dealing in private retirement scheme, offer investment advisory services, financial planning services and fund management services in relation to portfolio management.

iFAST Capital is a Federation of Investment Managers Malaysia (FiMM) registered Institutional Unit Trust Adviser (IUTA) and Institutional Private Retirement Scheme Adviser (IPRA). It is also an approved Financial Adviser licensed by the Central Bank of Malaysia to conduct financial advisory business and also a Participating Organisation of Bursa Malaysia Securities Berhad.

iFAST Capital is a subsidiary of iFAST Malaysia Sdn. Bhd. which is wholly owned by iFAST Corporation Ltd. (“iFAST Corporation”). iFAST Corporation is headquartered in Singapore and the iFAST group of companies are also present in Hong Kong, Malaysia and China. The company was incorporated in Singapore on 10 January 2000.

iFAST Corporation was listed on the Singapore Exchange Mainboard in December 2014.

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