Malaysia experiencing 7 percent inflation

Malaysia’s inflation is estimated to reach up to 7 percent in June and July, although Finance Minister Nor Mohamed Yakcop has said today that the rate should not exceed 5 percent for the whole of 2008, as the June-July rate will be higher, but he expects it will be contained through the rest of the year.

Nor Mohamed did not reveal the central bank’s likelihood of any further changes in interest rates even though the central bank said annual inflation probably topped 6.0 percent in June, as the government’s policy on interest rates is biased towards accommodative growth promotion.

In contrast, neighbouring countries Thailand and Indonesia have had to increase borrowing costs to counter the affect of increasing fuel and food prices.

Malaysia, which has shown similar signs of inflation, was pushed by a 41 percent increase in the price of oil but despite these gains, interest rates have remained unchanged since 2006.

The central bank will discuss the risks to growth at its policy meeting on July 25 and a monetary response to the near record inflationary pressure may be implemented in order to curb what is a 26-year high, as inflation touched 6.1 percent back in May 1982.

Despite this, the government is still optimistic that Malaysia’s economic growth for 2008 will still be around 5 percent and remains within the range given by the central bank back in March.

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