Malaysia's inflation to hit 6%-7% in June

Malaysia's inflation is likely to have hit 6% to 7% in June and the central bank would take action on monetary policy in the event of generalised price increases, the central bank governor said on Monday.

In an interview with Reuters, Tan Sri Dr Zeti Akhtar Aziz also said domestic factors, including recent cuts in fuel subsidies, and a slower external economic environment could lower the growth rate below 5% this year.

Costlier food and energy prices pushed Malaysia's May inflation to a 22-month high of 3.8%, even before the government raised domestic fuel prices in June.

"We expect inflation to rise, especially in the month of June following one of the adjustments by the government -- the reduction in subsidies. Therefore, for the month of June, inflation is likely to be between 6% to 7%," Zeti said in the Swiss city of Basel.

"We will monitor it very closely -- whether this results in the pass-through to other consumer items and whether there are any second round effects like wage increases ... And the central bank will be prompted to take action in the event that it becomes a generalised price increase."

Joining a growing rank of Asian countries unable to maintain hefty subsidies in the face of soaring oil prices, Malaysia raised petrol prices by 41% last month and lifted diesel prices by 63% as part of a broad reform of energy policy to prevent subsidies from eating up a third of its budget. - By The Edge Daily

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