January CPI up 2.4%, fastest rise in 5 years

  • Business
  • Thursday, 17 Feb 2005

Malaysian prices rose at the fastest pace in five years in January, as higher taxes pushed up tobacco and alcohol costs and a cut in subsidies made fuel more expensive. 

The consumer price index rose 2.4% from a year earlier, the Department of Statistics said in a faxed statement yesterday.  

The median forecast of 14 economists in a Bloomberg survey was for a 2.3 % gain. Inflation was the highest since December 1999.  

Inflation has more than doubled from a 2004 low of 0.9 % in February because the government has increased taxes on alcohol and tobacco and raised fuel prices twice to reduce the budget deficit to 3.8% of gross domestic product this year.  

Analysts such as Lee Heng Guie don't expect the central bank to raise record low interest rates because inflation is not being fueled by demand.  

“Inflation is not at a level that's threatening to growth so I don't think the central bank will act on it,'' said Lee, an economist at CIMB Securities Sdn. Inflation is likely to remain above 2% for the whole of 2005, he estimates.  

January's rise in prices was led by a 13% increase in the prices of beverages and tobacco.  

Cigarette makers including British American Tobacco Malaysia Bhd. and beer companies such as Carlsberg Brewery Malaysia Bhd. raised retail prices in September after the government increased duties on cigarettes by 40% and raised excise on liquor by between 20% and 100%.  

Food prices, which account for about a third of the consumer price index, rose 3.2% from a year earlier.  

Medical and health-care costs increased 1.4%. Rent, fuel and power gained 1%, while transport and communication costs increased 2% from a year earlier.  

The government raised the price of gasoline and diesel by 5 sen a liter in October, its second increase, to reduce the amount it pays to keep fuel prices low. The price of premium gasoline rose to RM1.42 a liter in Peninsula Malaysia. – Bloomberg 

For the full report from the Statistics Department click here

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