BNM reports slight uptick in core inflation for Q2 2024 driven by higher housing and utility costs

KUALA LUMPUR, Aug 16 — The country’s headline and core inflation both headline and core inflation edged higher to 1.9 per cent compared to 1.7 per cent and 1.8 per cent respectively in Q1, according to Bank Negara Malaysia (BNM) governor Datuk Abdul Rasheed Ghaffour.

“This increase mainly reflects the lagging effects of adjustments to administered prices introduced earlier in the year, including higher water tariffs and a service tax on electricity for higher consumption levels,” he said during a press conference on the release of the Q2 2024 GDP Statistics here today.

Abdul Rasheed added that the upward tick was largely driven by higher housing and utilities inflation up 3.1 per cent in Q2 from 2.6 per cent in the previous quarter.

He also noted that several government policy measures, along with idiosyncratic price movements, contributed to an increase in headline inflation, while core inflation also rose, due to higher prices in information and communication services, following price adjustments by several streaming service companies in May this year.

The BNM governor emphasised that as of June 2024, the impact of higher diesel pump prices in Peninsular Malaysia on overall inflation has been limited, with little evidence of significant spillover effects on consumer price index prices.

“Despite this, inflation is expected to trend higher in the second half of the year due to the recent rationalisation of diesel subsidies. However, the impact is expected to remain manageable, given government measures to minimise the extent of cost increases,” he said.

Abdul Rasheed added that headline inflation is projected to remain within the previously forecasted range of 2 per cent to 3.5 per cent, while core inflation is expected to stay within the range of 2 cent to 3 per cent.

Additionally, he said the headline inflation has remained modest at around 1.8 per cent during the first half of the year, and it is unlikely to exceed 2 per cent for the year as a whole, barring any additional shocks.

“The inflation outlook remains contingent on further domestic policy measures, particularly regarding fuel subsidy rationalisations, as well as external risks such as geopolitical tensions and climate change, which could drive up global commodity prices,” he said.

On the downside, Abdul Rasheed said weaker-than-expected global growth could lead to lower commodity prices and reduced demand, potentially easing local inflation pressures.