The inflation rate rose to a new 27-year high of 8.5 percent in July, driven higher by the escalating cost of fuel and electricity.
The result was substantially higher than expected, and increased pressure on the central Bank Negara to raise official interest rates, said Wan Suhaimi Saidi, an economist with Kenanga Investment Bank.
“Definitely it is way above expectations. The consensus among economists was that inflation in July will hit 7.8 percent,” he told AFP. “It is the highest since November 1981.”
“This gives the monetary authorities more reasons to push for a rate hike,” he added.
The Department of Statistics said that the cost of food and non-alcoholic drinks rose 11.2 percent in July compared to a year ago - an outcome that illustrates the burden high inflation is putting on Malaysian consumers.
A knock-on effect
“Among the contributing factors for (July’s inflation) were the substantial rise in the electricity tariff announced by the government… and the knock-on effect from the price increase of petrol and diesel,” it said in a statement.
The July data showed escalating prices in most categories, including transport which jumped 22.7 percent, and restaurants and hotels which rose 6.7 percent.
The government hiked the fuel price by 41 percent in June, in a move to rein in the ballooning cost of subsidies.
However, today it announced that petrol price will be slashed by 5.6 percent from midnight.
High inflation was one of the factors that led to an unprecedented humiliation at March general elections for the ruling coalition, which lost five states and a third of parliamentary seats.
Bank Negara has said it expects inflation to moderate in the second half of 2008 as economic growth is likely to slow down.
Anwar Ibrahim Club
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