Government data released by Ban Negara today showed Malaysia’s consumer price index rose 3.5 per cent in March, slower than February’s 3.7 per cent rise. Economists in a Reuters poll had forecast a rise of 3.6 per cent.
“The improvement further highlights the easing in inflationary pressure. It will be an opportunity for Bank Negara to cut rates further,” said Action Economics’ David Cohen.
A rate cut of 25 basis points is expected in next week’s Bank Negara meeting, according to a Reuters poll conducted before today’s inflation figures were announced.
The rise was due mostly to higher food and alcoholic beverage prices, while transport costs fell in tandem with lower oil prices.
Malaysia’s inflation rose to 27-year peaks in the middle of last year after the government slashed fuel subsidies because of soaring oil prices, but since then it has cut fuel prices seven times, helping push down inflation.
Inflation peaked at 8.5 per cent in both July and August.
Moderating inflation in recent months has allowed many central banks around the world to step up rate-cutting campaigns to kickstart flagging economic growth, but some have nearly exhausted their rate ammunition, forcing them to look to unconventional measures to stimulate business activity.
The Federal Reserve, the Bank of England and the Bank of Japan have all cut rates to near zero.
Malaysia has employed aggressive measures in a bid to counter the global economic slump that has sent demand for Asian goods crashing. It unveiled a RM60 billion stimulus package spread over two years and cut interest rates by 125 basis points this year.
“A couple of further small slashes with the overnight policy rate this month and next may serve as collateral to ensure the foundation is laid for an economic revival the latest by late 2009 or early 2010,” said Bank Islam economist Azrul Azwar Ahmad Tajudin. – Reuters
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