Malaysia Inflation


Rising inflation raises likelihood of further policy tightening

In March, consumer prices increased 0.1% over the previous month, which was below the 0.5% rise tallied in February. The increase was led by restaurants and hotels as well as education, while transport increased more moderately and food and non-alcoholic beverages prices were flat Owing to the price increase, annual inflation inched up from 2.9% in February to 3.0%, which fell slightly short of market expectations of 3.1%. In addition, annual average inflation maintained the upward trend in place since May 2010, rising from 1.9% in February to 2.1% in March. Most analysts expect the ascendant trend will continue in the coming months in the wake of rising food and energy prices. Despite rising inflation pressures, Central Bank Governor Zeti Akhtar Aziz asked the government to continue withdrawing its subsidies for fuel and food. The ensuing price increases for food and gasoline would probably require the Central Bank to again increase interest rates, which have been on hold since July last year.

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