Published August 23, 2008

M'sia July inflation hits 8.5%, beating forecasts

Email this article
Print article
Feedback

(KUALA LUMPUR) Malaysian annual inflation soared to 8.5 per cent last month, way above analyst forecasts for 7.8 per cent in a Reuters poll, and sharply up from 7.7 per cent in June.

The July data was the steepest rise since 8.5 per cent in December 1981 and the government also announced yesterday that the price of petrol will be cut to RM2.50 per litre from RM2.70 from Aug 23, a move which will dampen inflation.

It was unpopular petrol price hikes in June and electricity price rises last month that catapulted inflation from 3.8 per cent in May.

The cuts in fuel prices were brought forward from Sept 1 and will now take effect before a key by-election in which opposition leader Anwar Ibrahim challenges the government.

Despite the surge in inflation, Malaysia's central bank, alone in South-east Asia, has kept interest rates unchanged for over two years at 3.5 per cent.

Governor Zeti Akhtar Aziz has said that slower economic growth and weakening commodity prices would help to reduce price pressures ahead, especially next year.

Bank Negara Malaysia meets again on Monday to decide on rates after it surprised markets last month by leaving rates unchanged.



According to some economists, that decision damaged its credibility and showed that it had buckled under government pressure to refrain from a hike at a time when the ruling coalition felt threatened by an opposition alliance which has surged in polls. -- Reuters