by S BIRRUNTHA / pic MUHD AMIN NAHARUL

THE central bank projects overall inflation to remain high this year at between 2.8% to 3.8%, although the growth trend is expected to moderate.

Bank Negara Malaysia (BNM) in its 2022 annual report said continued robust domestic demand and an improving labour market are expected to maintain core inflation high in the near term, outpacing headline inflation for several months in 2023.

Gradual reduction of subsidies will also cause an increase in inflation, it added.

The central bank said the outlook for inflation in 2023 is highly uncertain and the balance of risks to inflation tends to be higher.

Global commodity prices, a primary driver of domestic inflation increase last year, could push inflation further especially if the geopolitical conflict in Ukraine worsens, BNM added.

“Higher inflation risk is also due to extreme weather conditions, higher than expected demand from China, and higher input costs due to the development of global financial markets.

“The level of inflationary pressure will also continue to depend on any changes to domestic policies related to subsidies and price controls,” the central bank said.