News: Inflation level in January expected to ease
Malaysia's inflation rate for January is expected to ease but the timing of the Chinese New Year holidays could have caused some distortion in the reading of the Consumer Price Index, according to several economists.
Irvin Seah, an economist from DBS Bank, said that the primary reason for this is the slowing growth momentum, along with a steady easing in the domestic demand-pull inflation.
"External dis-inflationary pressure is also present given the weak global demand," he said. "Although there is risk of a spike-up in global oil prices due to the rising political tension in the Middle-east, Malaysia will be less affected given that it is after all a net oil exporter."
Overall, Seah expects inflation to be stable at around 2.5 percent throughout this year. With this new trend, the central bank should have enough space to lower its policy rate in event of a sharp decline in global economic outlook, which could affect the country's growth performance.
Furthermore, Chua Hak Bin from the Bank of America Merrill Lynch believed that inflation could have been affected by the timing of the Lunar New Year, which was held in January 2012 in comparison with February in last year.
"Food prices may as result pose upside surprise, although the government tried to introduce ceilings on certain food items."
Image: HolidaysinMalaysia.org
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