AT a recent wedding reception, a friend told me he was worried that the average Malaysian did not seem concerned about inflation, before pointing to leftovers on the table.
"These people are well-aware of rising food prices and our shrinking purchasing power, yet they don't feel guilty about not finishing the food," he said as we looked at the host welcoming his guests, who probably ended up with more leftovers.
"Imagine the amount of money our host had to fork out to pay the caterer who bought chicken, bottled cooking oil and eggs at a higher price to prepare this feast."
A few days ago, RAM Rating Services Bhd revised the country 's full-year inflation forecast to three per cent from the earlier 2.5 per cent.
The removal of subsidies for bottled cooking oil and a higher price ceiling for food like chicken and eggs that took effect on July 1 contributed to this revision.
Food inflation climbed to 5.2 per cent in May this year, compared with 3.2 per cent in December last year.
Given the prolonged price pressures businesses are facing, the firm said cost pass-through to consumers will be inevitable by the second half of this year.
Inflation is here to stay.
It points to the overall rise in the prices of goods and services over time, which reduces the fluidity of the economy.
Therefore, it is important to distinguish the inherent effects of inflation of any rate from those that come into play only during periods when inflation runs unusually high.
One thing for sure: inflation erodes purchasing power, the primary and most pervasive effect.
An overall rise in prices over time reduces consumers' purchasing power, since a fixed amount of money will afford progressively less consumption.
Malaysians complain that RM50 a decade ago could buy more necessities than in the present day.A hypermarket owner recently told his TikTok viewers that they could still buy a bundle of necessities with RM50 if they knew their priorities.
I don't know whether this is rue, but I know that consumers lose purchasing power whether inflation is running at two or four per cent. They lose it twice as fast at the higher rate.
Lower-income consumers spend a higher proportion of their income on necessities than those with higher incomes, and they have less of a cushion against the loss of purchasing power inherent in inflation.
Over the years, our government always targeted modest inflation because a slightly positive rate greases the wheels of commerce.
It also deters deflation, whereby consumer and asset prices decrease over time, and purchasing power increases.
Our economic activity is poised to strengthen, with recent press reports indicating improvements in exports and retail spending.
My friend said high inflation is like a car speeding down a hill. To slow it down, one must hit the brakes. In this case, the "brakes" are interest rate hikes intended to slow down spending.
The Monetary Policy Committee of Bank Negara has increased the overnight policy rate by 25 basis points to 2.25 per cent.
Some economists said it is only natural for central banks the world over to raise the policy rate to combat inflation.
This is the rate they charge commercial banks for loans or pay commercial banks for deposits.
Commercial banks pass on a portion of these higher rates to customers, which reduces their purchasing power.
For this reason, some young Malaysians are complaining that it has become more expensive to borrow money for a house or car.
But it should encourage them to put away money for savings.
The writer, a former NST journalist, is a film scriptwriter whose penchant is finding new food haunts
