Malaysia
Malaysian Central Bank Governor Zeti Akhtar Aziz said the country's interest rates are at an “appropriate'' level to promote growth and other measures could be used to cool inflation.
“We aren't having any major issues except for rising prices that mainly emanate from rising costs and this is something that we have to address,'' Zeti said in Kuala Lumpur today. “Perhaps it won't be addressed by interest rates but with other policies.''
The central bank will probably keep its benchmark interest rate at 3.5 percent tomorrow as accelerating inflation prevents it from cutting borrowing costs to spur growth, according to all 16 economists in a Bloomberg News survey. Malaysia's key interest rate has been unchanged since April 2006.
Malaysia's inflation is running at a 10-month high and surging global commodity costs may push prices up further. Bank Negara also isn't likely to follow the 75 basis point emergency rate cut by the U.S. Federal Reserve last week because domestic demand is growing after the government increased spending on bridges and roads and raised the salaries of public workers.
The central bank isn't “unduly concerned'' about global growth and the country's interest rates are still at a level that should support the economy's expansion, Zeti said.
Stimulus Packages
“There are wide-ranging policy measures that we can put in place if it is needed,'' she said. “At this stage, we do not feel it is necessary.''
To help limit price gains, Malaysia controls the prices of essential goods such as fuel, flour, cooking oil and sugar. Last year it spent about 35 billion ringgit on fuel subsidies.
Other measures the government is considering include stockpiling cooking oil, rice and other essentials to safeguard supplies and stabilize prices, according to Deputy Prime Minister Najib Razak fast cash payday loan.
The Fed cut its benchmark rate by 75 basis points to 3.5 percent on Jan. 22. Malaysia's central bank will hold its first monetary policy meeting of the year tomorrow, and a statement is due tomorrow at 6 p.m. in Kuala Lumpur.
Private Spending
“With private consumption growing at a brisk rate and inflationary pressures picking up slightly, there is some comfort with keeping rates at current levels,'' said Wai Ho Leong, an economist at Barclays Capital in Singapore.
Some economists forecast that the central bank may have to increase rates in the second half of 2008 to cool inflation, which quickened to 2.4 percent in December from a 2007 low of 1.4 percent in June.
“Inflation has been grinding higher since the middle of last year,'' Robert Prior-Wandesforde and Prakriti Sofat, economists at HSBC Holdings Plc, said in a note on Jan. 24. “Malaysian inflation is already getting close to the central bank's 2 percent to 2.5 percent range.''
Consumer prices may rise further should Prime Minister Abdullah Ahmad Badawi be forced to increase fuel prices. The government has said it will develop a formula to curb the subsidies it gives on fuel to keep pump prices low.
That may happen in the second quarter, after elections that could be held as early as March, said the HSBC economists.
Inflation averaged 2 percent last year, compared with 3.6 percent in 2006. Prices may rise 3.1 percent this year, according to the median forecast of 10 economists in a Bloomberg survey.