November inflation seen at 9-month high

MALAYSIAN annual inflation probably touched a nine-month high in November, a Reuters poll showed, but the central bank is likely to refrain from raising interest rates for now for fear of upsetting economic growth.According to the survey of 14 economists, consumer prices in November probably rose 2.0 per cent from a year earlier, driven by food prices and increased demand since civil servants got a big pay rise in July.That would be the strongest annual rate since February’s 3.1 per cent.But Malaysian inflation is still relatively low, compared with rates of more than 3 per cent most of last year and early this year.Annual inflation stood at 1.9 per cent in October and 1.8 per cent in September.“Existing price ceilings on some basic necessities, a strong currency as well as the fuel subsidy programme have helped to keep inflation low in Malaysia despite the escalation in global food and energy prices,” said Irvin Seah, an economist with DBS Bank.“But that does not mean inflationary risk is non-existent in Malaysia. The tipping-point on the inflation outlook will come when the government has to cut fuel subsidies to lessen the burden of this programme on its fiscal position.” However, rising price pressures are unlikely to result in tighter monetary policy for now, some economists said.“The central bank will adopt a cautious approach. We expect inflation to still be under 2.5 per cent in the first quarter, so it’s not necessary for the central bank to raise interest rates,” said Gundy Cahyadi, an economist with Singapore-based IDEAglobal.com.Malaysian economic growth this year has been largely driven by domestic factors as weak demand for technology products and a gloomy global outlook weighed on exports.The central bank has kept the official interest rate at 3.50 percent since April 2006. At its last monetary policy meeting in November, it said the risks to inflation and economic growth were evenly balanced. - Reuters