KUALA LUMPUR, Sept 30 — Headline inflation has increased to 4.7 per cent in August 2022 from 4.4 per cent in July, in line with market expectations, said Bank Negara Malaysia (BNM).

The central bank said core inflation increased to 3.8 per cent during the month versus 3.4 per cent in the previous month.

"The increase largely reflected higher prices for rental and food away from home. Notwithstanding the higher annual inflation, 10 of the 12 main Consumer Price Index (CPI) categories registered moderating month-on-month increases,” BNM said in a statement today.

On net financing, the central bank said net financing grew by 6.1 per cent as at end-August compared with 5.3 per cent in July, driven by higher growth in both outstanding loans (August: 6.8 per cent; July: 5.9 per cent) and corporate bonds (August: 4.3 per cent; July: 3.7 per cent).

Outstanding household loans grew by 6.5 per cent (July: 6.1 per cent) amid steady growth across most purposes.

"Notably, growth in loan disbursements reflected sustained growth in loan applications, particularly for the purchase of houses and cars,” it said.

For businesses, growth in outstanding loans rose to 6.7 per cent (July: 5.9 per cent), mainly driven by the wholesale trade, manufacturing and the utilities sectors.

Credit flows to small and medium enterprises remained particularly forthcoming, with outstanding loan growth higher at 7.5 per cent (July: 6.6 per cent).

The central bank highlighted that the global financial conditions had tightened after the United States (US) Federal Reserve reaffirmed its commitment to bring the US inflation down despite lower growth expectations.

"However, domestic financial market adjustments remained orderly amid low foreign exchange volatility and sufficient trading volume.

"The 10-year Malaysia Government Bonds yield increased by 10 basis points (bps), alongside the higher 10-year US Treasury bond yield (45.4 bps),” it said.

On the ringgit, BNM said the local currency has depreciated by 0.8 per cent amid continued strong US dollar environment, while the FBM KLCI rose by 1.3 per cent, supported by foreign inflows and stronger-

than-expected second quarter Malaysia gross domestic product growth.

"Banks’ capital position remained strong to withstand potential stress and continue supporting credit flows to the economy.

"This enabled some banks to sustain dividend payouts during the month. As at end-August, the banking system recorded excess capital buffers of RM126.7 billion,” it said.

BNM said the resilience of banks continued to be underpinned by sound asset quality, and overall gross and net impaired loans ratios remained broadly stable at 1.84 per cent (July: 1.85 per cent) and 1.1 per cent (July: 1.2 per cent), respectively.

Loan loss coverage ratio (including regulatory reserves) remained at a prudent level of 113.7 per cent of impaired loans, with total provisions accounting for 1.8 per cent of total loans.

As at end-August, the banking system recorded RM 41.5 billion of total provisions and regulatory reserves. — Bernama