For the fourth quarter (Q4), it said the country’s headline inflation moderated to 3.9% versus 4.5% in the third quarter of 2022, mainly due to the fading base effects in electricity inflation, a key contributor to the higher inflation in the third quarter of 2021.

“The moderating trend in key global commodity prices partly led to lower inflation in some consumer price index (CPI) items, including fuel,” it said in a statement announcing the fourth quarter gross domestic product (GDP) growth and the full-year performance.

In contrast with headline inflation, Malaysia’s core inflation excludes more volatile food and fuel price data.

The central bank said that inflation for some key staple food items, such as fresh meat and eggs, also moderated during the quarter.

However, the downward impact of these factors was partially offset by higher core inflation. Core inflation increased to 4.2% (Q3 2022: 3.7%), driven by the continued strength in demand amid a still-elevated cost environment.

“For 2023, the headline and core inflation rates are expected to moderate but remain elevated in 2023 amid lingering cost and demand pressures,” it said.

The BNM said core inflation is expected to remain elevated in the near term, in part due to the low base in the first half of 2022.

Existing price controls and fuel subsidies, as well as the remaining spare capacity in the economy, will continue to partly contain upward pressures to inflation, the central bank said.

The inflation outlook remains highly subject to any changes to domestic policy, as well as global commodity price developments, it added.

BNM today announced the country’s GDP growth for Q4, which grew by 7% from 14.2% in Q3 2022, as support from the stimulus measures and low base effects waned.

For the whole of 2022, Malaysia’s economic growth rose to a 22-year high of 8.7% against 3.1% in the previous year.