KUALA LUMPUR: Malaysia cut fuel prices for the second time in a month after annual inflation in August came in at 8.5 percent, the same level as in July.
The number was broadly in line with a Reuters poll of 8.4 percent and held near 27-year highs.
The government announced it was cutting petrol and diesel prices by another 10 Malaysian cents each, which analysts said was likely to ease price pressures in coming months.
"There will probably be an easing of the number from September onwards, primarily because of the falling global food and fuel prices as well as the cut in domestic fuel prices," said Gundy Cahyadi, economist at IDEAglobal.com.
"Having said that, it will stay above 8 percent for the rest of the year," he said, adding that his average forecast for the full year was 6.1 percent."
Inflation in Malaysia has climbed since the government cut fuel subsidies as global oil prices rose. Annual inflation in May stood at 3.8 percent.
Malaysia raised petrol prices by 41 percent and diesel by 63 percent in June in an effort to staunch rising budget spending, but then partly reversed them on Aug. 23 as world oil prices retreated from a record high in July of above $147 a barrel.
The country's unpopular government has come under pressure due to rising inflation and a resurgent opposition.
A further cut in fuel prices announced on Wednesday means inflation is likely to ease further, analyst said, virtually ruling out any possibility of a rate hike by the central bank.
Bank Negara Malaysia has kept its official rate unchanged at 3.50 percent, fearing a rate hike could slow economic growth.
Rates were last raised in April 2006.
(Reporting by Faisal Aziz and David Chance, editing by Jacqueline Wong)
Reuters
24/09/08
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