Core inflation to rise to 1.8% in 2022

The expected increase will be driven by three factors.

Core inflation will rise to 1.8% in 2022 due to three factors, Maybank said in a report.

These factors are higher energy and food prices; higher wage costs from a tighter labour market and expansion of the Progressive Wage Model to the retail sector in 2022 and food and beverage in 2023; and introduction of the Local Qualifying Salary of $1,400 from September 2022.

The following year however the analyst said core inflation will moderate to 1.5% since foreign workers shortage will be less “as borders restrictions are slowly unwound.”

Headline inflation will likewise rise next year to 2.6%, up from 2.2% in 2021 due to rising accommodation costs and private transport costs.

In general, Maybank said inflation will peak in the second quarter of 2022 and will eventually slow down in the second half as inflation pressures from energy and food prices, and supply chain disruptions ease.