IN April 2022, our national inflation rose to 2.3%, which exceeded the average inflation of 1.9% in Malaysia from the period April 2011 to April 2022.

And just recently, it was reported that inflation rose to 2.8% in May against the consensus of 2.7%. A vast development indeed.

In addition, US Federal Reserve’s (Fed) move to raise the interest rate hike by 75 bps on June 15, 2022, had alarmed all quarters over the world about what could be coming next – big inflation.

However, what do all these means? Especially to the people out there?

Generally, if most people do not understand what the numbers above mean, they do know one thing – they are feeling the pinch from the price hike of necessities, which has begun trickling into the wallets of every household.

From there, they knew and sensed that the inflation period is here. Not very surprising but not pleasant either, inflation is to stay persistent this time around.

In concurrence with the recent development, FSMOne Malaysia research manager Jason Wong commented: “On one hand, inflation is reducing the purchasing power of consumers. On the other hand, rising interest rates mean that consumers are ‘forced’ to absorb these rising borrowing costs. These are double whammies for consumers which would lead to dwindling disposable income while wages and salaries are hardly changed.

“Nevertheless, Bank Negara Malaysia’s (BNM) move through its raise of Overnight Policy Rate in May 2022 by 25 basis points (bps) to 2% is commendable as the central bank is being proactive to stave off rising inflation in the country. At the same time, we believe this move will cushion some of the negative impacts on the ringgit caused by the Fed’s recent aggressive interest rate hikes,” he said.

“The Research Team at FSMOne foresees that the central bank will make another three more 25-bps hikes to the interest rate during the remaining Monetary Policy Committee Meetings that are set to take place this year. We believe the central bank does not wish to make the mistake like Fed did, by hiking rates too slowly and letting inflation spiral out of control. Hence, BNM stays abreast on this matter,” Wong added.

Translating this to the current daily living of the majority of people, Wong further elaborated that the current economic situation has led to Hobson’s choice moves by the Government.

“Government has started the removal of subsidies moderately. As the pandemic came along with the Ukraine-Russia war recently, where supply chains were disrupted and shortages increased,

many household commodities prices have been soaring up. China’s lockdown in certain provinces also affected major productions of industrial parts that they supply to Malaysia and other countries. Domino effects took place and subsequently, our local production is delayed resulting from this and affected end-users as well.

“All factors combined and ramped up, these contributed to the increasing inflation in the country. Government is now challenged to cope with the increasing cost of many commodities,” said Wong.

By July 1, the prices of eggs and chicken are expected to increase from the current price, RM8.90 per kg.

The prime minister recently announced that the new ceiling price for chicken will be announced by the Agriculture and Food Industries Ministry soon.

The price ceiling for bottled cooking oil weighing 2kg, 3kg and 5kg will also be removed on July 1.

Based on these factors, it is foreseen that Malaysians will be facing greater food security issues as food items, even dining out, will be more expensive.

In addition, food supplies could be tighter than before which may lead to the limited quantity being sold to consumers.

Besides food security, the majority of Malaysians are challenged with job security in terms of disposable income, as basic items are getting more expensive and possibly overall wholesale, retail and trade sales would drop as a result of this.

Malaysians may have no other choice but to start cutting off expenses and tightening their budget to match their monthly income.

Not to mention commodities and energy prices are also increasing higher than ever.

The price of RON97 petrol is now higher at RM4.84 per litre from RM3.94, which was last recorded on May 11.

Although the price of RON95 has not changed from RM2.05 per litre, it is foreseen that the price of RON95 may follow suit to RON97 at a certain point.

It is just a matter of sooner or later. However, water and electricity tariffs are maintained in Peninsular Malaysia.

What does this mean to all Malaysians? Are we expecting a recession in the near future?

We are living in the bubble of protection from the government today, with the lifting of fuel subsidies, like a balloon, as the air pressure increases internally, it’s only a matter of time before the rubber material gives way and pops.

FSMOne Malaysia is a Multi-Asset Investment Platform under iFAST Capital Sdn Bhd (“iFAST Capital”), established in Malaysia in 2008. Comments: