3.9% CPI rise in June lower than expected

  • Business
  • Thursday, 20 Jul 2006

PETALING JAYA: Malaysia posted a smaller-than-expected inflation rate with the consumer price index (CPI) for June rising 3.9% to 103.8 from a year ago and gaining 0.2% from May, the Statistics Department said yesterday. 

For the first six months of the year, the CPI also rose 3.9% to 103 compared with 99.1 in the same period last year. 

“The 3.9% CPI growth for June is definitely lower than consensus estimates,” said OSK Securities economist Sia Ket Ee. 

“There is an absence of second-round effect from the cumulative one-off administered price adjustments such as electricity tariff hikes taking effect in the month. 

“If the effect of such one-off government administered price adjustments were stripped out, inflation appears well contained at below the perceived market threshold of 3%,” he said. 

RAM Consultancy Services chief economist Dr Yeah Kim Leng said: “It appears the inflation figure has levelled off at 3.9% in June despite tariff hikes. 

“While this is positive, the figure is still relatively high against the historical 2% to 3%. However, given high global crude oil prices, this figure is considered moderate.” 

On Bank Negara's monetary policy committee which will be meeting on July 28, Yeah said given that inflation had levelled off, the central bank would have more flexibility to hold off interest rate increases for the time being. 

Prior to the release of the latest CPI figures, the broad market had widely anticipated that the central bank would raise interest rates by at least 25 basis points. 

“Another 25 basis-point hike was widely anticipated, but they (the central bank) may stay put on this decision, with the lack of inflationary indications in the country,” said Sia. 

Economists quoted by Reuters were of the view that price pressures remained, with some not discounting the possibility of another interest rate hike. 

Forecast Pte Ltd economist Leslie Khoo said: “Maybe the power tariff hike will kick in later than expected, and when it kicks in, the CPI will accelerate. I guess it will be in the July figures.  

“Given the lagging impact of any monetary policy, I will keep my stance (that) they will still raise the rates a bit. If you just let the interest rate work through the economy, they will hope, in August or September, it will tone down the impact of the power tariff hike. 

“I don't see that the impact of the power tariff hike will be limited. Even though over 50% of consumers will be exempted, what about the business side? So I still believe they will hike (the interest rate) when they meet on July 28.” 

K&N Kenanga economist Wan Suhaimi said the CPI was relatively subdued, partly due to a high base last year and also because the strong ringgit helped curtail imported inflation to an extent.  

“But the underlying price risk is still there due to high oil prices worldwide and because the cost of goods and doing business has gone up.  

“I still see them raising the rates by 25 basis points to close the gap with the US and to stabilise capital outflows. I expect the overnight rate to go up to 4% by the end of the year,” he said. 

MIDF Sisma equity economist Imran Nurginias Ibrahim expects another hike in interest rates, most probably this month and “then that will be it for the rest of the year.”  

On why a June rise in power tariffs did not have more of an impact on inflation, he said: “There's not much weighting of electricity in the (CPI) basket. That's why we didn't see much change.”

For the full report from the Statistics Department click here

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3

Next In Business News

Malayan Cement buys YTL's cement biz for RM5.15b
Teladan Setia posts net profit of RM7.1mil in 1Q
Taiwan stock crash shows world dangers of too much leverage
Philippine cenbank holds rates at record low to support pandemic-hit economy
Kerjaya Prospek announces boardroom changes after takeover for E&O
Private equity firm to buy UDG Healthcare in US$3.7b deal
Zafrul: Keeping economy open during MCO 3.0 helps protect vulnerable, businesses
US removes Xiaomi from government blacklist
Kerjaya, E&O may consider merging in 5 to 10 years, chairman says
SoftBank posts US$37b Vision Fund profit, eyes further IPOs

Stories You'll Enjoy