Malaysia’s inflation rate climbed in June to the highest level in more than a year, an increase that may be augmented as the government cuts fuel and food subsidies.
Consumer prices climbed 1.7 percent from a year earlier after gaining 1.6 percent in May, the statistics department said in a statement today. That matched the median forecast in a Bloomberg News survey of 13 economists.
Bank Negara Malaysia has raised interest rates three times since early March as a regional rebound from last year’s global recession prompted policy makers from India to South Korea to boost borrowing costs. Prices are expected to rise at a “gradual pace” in the coming months as the Malaysian economy improves and the government adjusts prices of subsidized goods, the central bank said this month.
“Strong growth and improvement in the labor market are the main reasons why inflation is set to rise going forward,” Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore, said before the report. “Though the effects of the recent fuel and sugar subsidy cuts are unlikely to be as significant as the last round in June 2008, there will certainly be some impact on headline inflation numbers.”
The Southeast Asian nation trimmed subsidies for sugar, gasoline, diesel and liquefied petroleum gas on July 16 to narrow the budget deficit.
Still, Malaysian food and drinks companies gave assurances to the government they won’t pass on higher sugar and fuel costs to consumers, Minister for Domestic Trade, Co-operatives and Consumerism Ismail Sabri Yaakob said this week, a move that may limit price pressures.
Food prices, which account for about 31 percent of Malaysia’s inflation index, rose 2.7 percent in June, today’s report showed. The cost of housing, utilities and fuels gained 0.8 percent. Transport increased 1.3 percent.
Bloomberg
Oh noooo....I already said time and again our economy is still not in the recovery mode yet !!!
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