Stronger ringgit to relieve inflation pressures
Published: Dec 23, 2010 5:36 AM | Updated: Dec 23, 2010 6:05 AM
Cost-push factor owing to, among others, rationalisation of subsidies and higher global commodity prices could trigger inflation pressure but a stronger ringgit could help mute it to some extent.
Cost-push factor owing to, among others, rationalisation of subsidies and higher global commodity prices could trigger inflation pressure but a stronger ringgit could help mute it to some extent.
At 9.02am today, the local unit stood higher at 3.1235/1265 against the greenback compared with yesterday's close of 3.1300/1331.
Inflation in November 2010 rose at the same pace in October 2010, up two percent, year-on-year, and 0.3 percent on a month on month basis, falling within both MIDF Research's consensus and expectations, it said.
This brings the average inflation so far in 2010 to 1.7 percent with food prices jumping significantly in November, it said in its report today.
MIDF said higher global commodity prices may have knocked into food prices, further adding pressure on inflation.
"Inflation will remain driven by further relaxation in fuel and sugar subsidy, which will raise cost push inflation and demand pull inflation benefitting from strong liquidity, better economy and positive wealth effect," it added.
As for the overnight policy rate (OPR), MIDF said further erosion in real returns and real money was expected if Bank Negara Malaysia holds the OPR at 2.75 percent on the back of rising inflation.
Real returns now was at 0.80 percent.
"We have now placed a 30 per cent odd for OPR to be raised by 25 basis points in the first-quarter of 2011 and another 25-50 basis points in the second half of 2011, bringing the cumulative hike to 50-75 basis points," said MIDF.
- Bernama
At 9.02am today, the local unit stood higher at 3.1235/1265 against the greenback compared with yesterday's close of 3.1300/1331.
Inflation in November 2010 rose at the same pace in October 2010, up two percent, year-on-year, and 0.3 percent on a month on month basis, falling within both MIDF Research's consensus and expectations, it said.This brings the average inflation so far in 2010 to 1.7 percent with food prices jumping significantly in November, it said in its report today.
MIDF said higher global commodity prices may have knocked into food prices, further adding pressure on inflation.
"Inflation will remain driven by further relaxation in fuel and sugar subsidy, which will raise cost push inflation and demand pull inflation benefitting from strong liquidity, better economy and positive wealth effect," it added.
As for the overnight policy rate (OPR), MIDF said further erosion in real returns and real money was expected if Bank Negara Malaysia holds the OPR at 2.75 percent on the back of rising inflation.
Real returns now was at 0.80 percent.
"We have now placed a 30 per cent odd for OPR to be raised by 25 basis points in the first-quarter of 2011 and another 25-50 basis points in the second half of 2011, bringing the cumulative hike to 50-75 basis points," said MIDF.
- Bernama
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