Slower economic growth to cool inflation:Malaysia

MALAYSIA'S slowing economic growth and recent falls in the prices of commodities will help cool inflation, especially in the second half of 2009, Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz said."The moderation in growth, as we see it, will have some dampening effect on inflation," Zeti told reporters yesterday on the sidelines of the Malaysian Islamic Finance Issuers and Investors Forum 2008.Malaysia's inflation rate stood at a 26-year high of 7.7 per cent in June after a fuel price increase led to a general rise in prices of goods and services.Zeti said the adjustment in prices was just the first-round effect.
"What we need to monitor is the second-round effect. With the moderation in growth, we expect that inflation will moderate next year, particularly in the second half," she said.Zeti stressed that while there would be a moderation in growth, the country must avoid slipping into a fundamental economic slowdown.A fundamental economic slowdown is said to occur when there is "increased unemployment", she explained.On the ringgit, Zeti said its recent fall reflected the movements of other major currencies worldwide."This is just an inter-national development and we will monitor it closely," she said.On whether Bank Negara has been intervening in the foreign exchange market, as has been speculated by dealers, Zeti said that any intervention it undertakes is to maintain orderly market conditions."We will not be intervening to affect the underlying trend of the currency," she stressed.The ringgit fell against the US dollar to 3.3160/3180 yesterday from last Friday's closing of 3.3000/3030. On issues pertaining to Malayan Banking Bhd's purchase of an Indonesian bank, Zeti declined comment. -www.btimes.com.my