Inflation at 27 year high!

Report from Malaysiakini:


The inflation rate has jumped to a 27-year high of 8.5 percent in August, driven by the escalating cost of food and fuel, according to official data released today.


"The result was slightly higher than expected but the central Bank Negara would not raise interest rates to ensure growth," said Wan Suhaimi Saidi, an economist with Kenanga Investment Bank.




"It is slightly above my expectation. I was looking at 8.4 percent. I don't think the government will increase the key interest rates. It will be maintained at 3.50 percent till the year-end to support growth," he told AFP.

The Department of Statistics revised downwards the inflation figure for July to 8.3 percent. It had earlier stated that the figure was 8.5 percent.

It said the cost of food and non-alcoholic drinks rose 11.7 percent in August compared to a year ago. The high inflation is already hurting consumers with many Malaysians cutting down on their food bill.

"The increase (in inflation for August) was shown in the selected main groups, namely food and non-alcoholic," it said in a statement.

Escalating food, transport prices

The August data showed escalating prices in most categories, including transport which jumped 21.8 percent, and restaurants and hotels which rose 6.5 percent.

The government hiked the fuel price by 41 percent in June, in a move to rein in the ballooning cost of subsidies but it has indicated prices could be lowered soon.

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.


The raising of interest rates is to induce saving to counter inflation. Even a first year economics student knows that. Why not do it now?