The consumer-price index—the Southeast Asian country's main gauge of inflation—rose 3.2% in July from a year earlier and 0.1% month-over-month, mainly due to more expensive food and nonfood items, official data Wednesday showed. The median forecast from a Wall Street Journal poll of 15 economists was for an on-year rise of 3.3%. In June, the CPI climbed 3.3%.
A further benchmark interest rate rise still may be on the cards this year, Australia and New Zealand Banking Group ANZ.AU +0.51% Limited said in a report after the data release. The central bank is looking to anchor inflation expectations before the government implements more subsidy cuts and introduce consumption tax that would raise prices in the broader economy, the report said.
Malaysia's economic growth accelerated unexpectedly in the April-to-June quarter, with gross domestic product expanding 6.4% from a year earlier, as the improving global recovery boosted demand for the country's exports despite efforts to trim government spending and measures to control soaring household debt.
That allowed the central bank to raise its benchmark overnight policy rate in July, its first change in more than three years, in a bid to contain risks of economic and financial "imbalances" that may threaten growth.
However, some economists say the central bank may delay the rate rise after Wednesday's inflation data.
"We believe inflation is likely to remain above 3% for some time and believe there is a need to maintain a hawkish bias in monetary policy," Barclays PLC said in a report. Barclays maintains its forecast of a 0.25 percentage point increase in September, although the likelihood of the next rate increase being pushed back has risen, it added.
Inflation is expected to remain within 3%-4% this year and prices will "temporarily rise" in 2015 before stabilizing toward the "long-term average" of 3% in 2016, Bank Negara Malaysia Gov. Zeti Akhtar Aziz said at an Aug. 15 news conference.
The government pledged to introduce the so-called goods and services tax of 6% in April 2015 and to continue gradually shrinking its subsidy program that covers wide-ranging essential goods from gasoline to cooking oil. Last year, the government scrapped subsidies on sugar, and reduced discounts on diesel and a widely used gasoline variant to tighten spending. This made these fuels costlier, leading to higher prices for goods in the wider economy since September. The government also raised electricity prices in January.
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