Think tank CME warned on accelerating money supply growth
KUALA LUMPUR: Malaysia's money supply growth has accelerated to levels last seen during the Covid-19 pandemic, while a sharp rise in producer prices is raising concerns that inflationary pressures could become more persistent, a think tank firm warned.
Malaysia's money supply growth has intensified to levels last observed during the Covid-19 pandemic, according to a warning from the think tank Center for Market Education (CME). The June money supply growth rate of 6.78% year-on-year is nearly identical to the 6.91% recorded in August 2020 and 6.75% in September 2020 during the peak of the monetary expansion during the pandemic.
Since January, money supply has been on the rise, expanding by 3.66% in January and then accelerating to 1.10%, 5.38%, 7.77%, and 9.22% in subsequent months. Alongside this, producer price inflation has surged, with the producer price index jumping from a contraction of 3.45% in February to a growth of 9.22% in June. CME, led by Dr Carmelo Ferlito, has cautioned that the combination of a strong supply-side shock and accelerating money supply could create conditions for temporary and generalised price pressures.
The think tank emphasized that while Malaysia has limited ability to address external supply constraints, domestic policy could influence whether such pressures are accommodated through excessive money and credit expansion.
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