Geoffrey Williams of Malaysia University of Science and Technology said core inflation was likely to remain low, at between 0.5% and 1.5%, while non-oil inflation was expected to be flat at around zero.

“Prices of goods in shops are likely to remain stable because of high competition and low demand due to the effects of the lockdowns. Some prices might rise due to higher oil costs on transport and supplies, but this is likely to be small.

“Prices at petrol pumps are controlled anyway, so BNM is actually doing the right thing already by telling us to expect it but also not to worry about it because it’s temporary,” he told FMT.

On Wednesday, BNM said Malaysia’s headline inflation was expected to rise to above 5% in the second quarter of the year, due to a lower base from cheaper fuel prices in the corresponding quarter of 2020.

However, BNM governor Nor Shamsiah Mohd Yunus said the spike would be temporary and that the average for the year would be between 2.5% and 4%.

Headline inflation was -1.2% in the second quarter of 2020 when Malaysia went into a nationwide lockdown to curb the spread of the Covid-19 virus.

Core inflation measures the change in average consumer prices after excluding items with volatile price movements, such as fuel and food, from the index. Headline inflation measures the total inflation within an economy, including prices of commodities such as food and energy.

Williams said headline inflation should not be used as a reference for government policies due to how it was subjected to variables outside BNM’s control, adding that the index was “a guide at best”.

While maintaining that there was no need for any specific policy change to address the headline inflation spike, he lauded Nor Shamsiah for warning about the increase while managing expectations.

“She is telling us to expect the oil price effect and not to be surprised or worried because it will go away. This helps to moderate any concerns.”

Meanwhile, Sunway University’s Yeah Kim Leng said Malaysians would need to budget for higher expenditure on fuel this year, with oil prices recovering closer to pre-pandemic levels.

He told FMT that fuel prices are expected to inch higher as global economic activities pick up the pace, barring any unforeseen circumstances like a major disruption in oil supply.

“Just like we had negative inflation from March last year to January this year, the headline inflation spike is a temporary phenomenon that disappears when the main contributing factor, oil price, recovers,” he said.