KUALA LUMPUR, The lower-than-expected inflation rate of two per cent in Malaysia for June 2024 suggests that the impact of diesel subsidy rationalisation appears minimal, said an economist.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the diesel subsidy rationalisation implemented on June 10 accounted for just 0.2 per cent of the total Consumer Price Index (CPI) weight.
‘However, the risk of higher inflation going forward will depend on business pricing behaviour, as companies might raise prices to maintain profit margins,” he told Bernama.
The recent subsidy adjustment resulted in a significant increase in diesel prices from RM2.15 to RM3.35 per litre.
Mohd Afzanizam said the real interest rate of one per cent remains positive, indicating that the current monetary policy is quite restrictive.
He added that Bank Negara Malaysia is unlikely to ease its monetary policy, unlike central banks in developed countries and China, which should support the ringgit.
According to
the Department of Statistics Malaysia, the CPI stood at 133.0 points, driven by increases in the restaurant and accommodation services sector (3.3 per cent), as well as housing, water, electricity, gas and other fuels (3.2 per cent).
Meanwhile, UOB Kay Hian Wealth Advisors head of investment research Mohd Sedek Jantan said while headline inflation remains stable, food costs at home have risen, increasing from 0.5 per cent in March 2024 to 0.9 per cent in June 2024.
He attributed this spike primarily to the vegetable category, which saw inflation rise from 4.8 per cent to 6.2 per cent.
‘The rise in vegetable inflation can be attributed to higher logistics and transportation costs, which in turn increase expenses for farmers,” he said.
Mohd Sedek noted that the Budi Madani diesel subsidy programme provides subsidies to farmers or smallholders whose companies are registered with relevant agencies.
‘However, to qualify, they must be active commodity smallholders with an annual turnover between RM50,000 and R
M300,000 from farming and commodities.
‘In our view, the government should revisit this requirement, as not many farmers fall within this category,” he added.
Source: BERNAMA News Agency