Increasing Inflation Rates My Smart Money Tips

24 April, 2017

The Star today announced that inflation has soared to a record high of 7.7% in 26 years! I guess a high inflation was partly expected due to the record hike in petrol prices and the subsequent increase of food prices. However, an inflation rate of that levels are pretty shocking, to say the least.

The authorities are expecting it to touch the 8% levels in October! Our measly pay increments aren’t even going to cushion this hike in inflation! Let’s watch the outcome of the monetary policy meeting by Bank Negara tomorrow.

PETALING JAYA: The country’s inflation rate, which surged to a 26-year high of 7.7% in June, is expected to be sustained at high levels over the next few months, fuelled by the new power tariffs which took effect this month.

An economist with a local research house said yesterday he expected inflationary pressure to be sustained and consumer price index (CPI) to peak at 8% in October.

He said the CPI was expected to decline in November and December at 7.6% due to the higher base effect.

He said the rising inflationary pressure might see Bank Negara increasing the overnight policy rate (OPR), now at 3.5%, at its monetary policy meeting tomorrow to rein in the rising inflation.

On July 9, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said the CPI in June was expected to exceed 6% because of adjustments to the petrol and diesel prices by 40.6% and 63.3% respectively.

Kenanga Investment Research economist Wan Suhaimi Saidi said there was a 50:50 chance that interest rates would be increased.

He said central banks in the Philippines, Thailand and Indonesia had also hiked their interest rates.

“If Bank Negara does not increase the OPR at the Friday meeting, it is likely to increase the rate in August by at least 25 basis points,” he said.

He pointed out that Malaysia’s interest rates were still among lowest in the region and it had room to increase.

Yesterday, the Statistics Department said the CPI surged to 7.7% in June, mainly due to the sharp increase in prices of petrol and diesel which took effect from June 5.

The Statistics Department said yesterday the consumer price index (CPI) for May rose from 105.3 to 113.4 from a year ago. This was the highest since January 1982 when the CPI rose 7.8%.

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