Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on March 22, 2021 - March 28, 2021

All eyes this week will be on the February headline inflation rate, as measured by the Consumer Price Index (CPI), amid expectations of a first positive reading in months.

The Department of Statistics Malaysia is due to release the data on Wednesday. In January, the CPI came in better than expected, falling 0.2% year on year to 122.1, after a 0.4% y-o-y decline in December 2020. A poll by Bloomberg and Reuters had each projected a 0.8% contraction.

January was the 11th consecutive month that Malaysia experienced a deflation. The month’s reading, however, was 1.2% higher than December 2020.

UOB Malaysia economists Julia Goh and Loke Siew Ting said January’s narrower decline in the inflation rate further affirmed its view that the country would return to a positive CPI in the first quarter of 2021, or as early as February.

Bank Negara Malaysia recently said headline inflation in 2021 was projected to average higher, owing mainly to an increase in global oil prices. In terms of trajectory, it is anticipated to temporarily spike in the second quarter because of the lower base effect from low domestic retail fuel prices in 2Q2020, before moderating thereafter.

“Underlying inflation is expected to remain subdued amid continued spare capacity in the economy. The outlook, however, is subject to global oil and commodity price developments,” the central bank said. Brent crude was down around 1.1% at US$62.59 as at last Friday night.

Last week, Putrajaya announced a RM20 billion fiscal package known as PEMERKASA to stimulate the economy, with RM11 billion in the form of direct fiscal injection from the government. The latest package brings total fiscal assistance since 2020 to RM340 billion, over six packages.

On Monday, Bank Negara will release its international reserves data as at March 15. On the corporate front, Astro Malaysia Holdings Bhd is expected to release its fourth-quarter results for the year ending Jan 31, 2021, on Thursday.

Elsewhere in the region, the central banks of Thailand and the Philippines are due to announce their interest rate decision on Wednesday and Thursday respectively. Both are expected to stand pat on key rates.

Thailand’s rate is at 0.5% currently, and UOB Global Economics & Markets Research expects it to stay unchanged for the whole of 2021. “That said, Thailand’s economic growth is likely to be uneven, amid pronounced downside risks should Covid-19 worsen. Also, should macroeconomic fundamentals stay unexpectedly subdued into 2H2021, a 25-basis-point rate cut cannot be ruled out,” it says.

As for the Philippines, its overnight reverse repurchase rate is currently 2%.

Meanwhile, Vietnam may announce its first-quarter gross domestic product (GDP) data this week.

Over in the US, it will be a busy week for macroeconomic data releases. Among the key numbers are existing home sales data for February (March 22), current account data for 4Q2020 as well as February new-home sales (March 23), preliminary February durable goods orders (March 24), initial jobless claims (March 25), personal income and spending (March 26).

On March 25, the US will announce its final GDP reading for 4Q2020. The 4Q GDP was revised upwards on Feb 25 to an annualised rate of 4.1%, according to the Commerce Department’s second reading of the data.

China, in contrast, will have a quiet week. On Monday, it will announce its latest loan prime rate data. In February, it kept the one-year LPR at 3.85% and five-year LPR at 4.65%, for the 10th straight month. The LPR is a lending reference rate set monthly by 18 banks. Most new and outstanding loans in China are based on the one-year LPR, whereas the five-year rate influences the pricing of mortgages.

In a Bloomberg poll as at last Friday, all 22 economists were unanimous that rates would stay unchanged. China recently said there would be no sudden U-turn of policy operations, although it emphasised that monetary policy would be more flexible.

On Saturday, China will announce February industrial profits.

This week, February trade data will come out of Thailand (March 24), Hong Kong (March 25) and New Zealand (March 24). Europe will begin daylight savings on March 28.

The Switzerland-based Bank for International Settlements (BIS) is expected to hold its inaugural BIS Innovation Summit on March 22 to 25. Of interest will be a virtual panel discussion on March 22 between Jerome Powell (Federal Open Market Committee chair), Jens Weidmann (president of the Deutsche Bundesbank) and Agustín Carstens (BIS general manager) on the topic of central bank innovation.

Keynote speakers for the BIS event include heavyweights European Central Bank president Christine Lagarde, Bank of England deputy governor Jon Cunliffe and the United Nations special envoy for climate action and finance Mark Carney.

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