PETALING JAYA: The consumer price index (CPI) jumped to 8.5% in July from a year earlier, the highest in nearly 27 years, fuelled by the increase in the price of petrol and electricity tariffs.
CIMB Research head Lee Heng Guie said: “This exceeds our expectations. It clearly shows the impact of the increase in fuel and electricity prices and continued strong food prices.”
He said inflation was likely to peak this month or next before easing in the final quarter.
“We expect the inflation rate in 2009 to be much lower than this year’s, but it will depend on the movement of oil prices,” Lee told StarBiz.
“It appears the global economic growth could undergo some slowdown. This would lead to softer demand for food and commodities, bringing prices lower and easing inflationary pressures,” he added.
The July inflation figure, the highest since December 1981, came on the day the Government announced a cut in the petrol price to RM2.55 a litre from RM2.70 before.
For the first seven months, the CPI is up 4.4% compared with a year earlier.
The index gained 7.7% in June, and the market had expected a 7.8% increase in July.
RAM Holdings Bhd chief economist Dr Yeah Kim Leng believes that inflation, at 8.5%, has peaked, “provided petrol prices are not revised upwards.”
He said the market estimate of an inflation rate of 5.7% for the full year was achievable. “It could even be lower if pump prices are brought down further,” Yeah said.
The Government has said it would review pump prices every month from Sept 1 depending on price fluctuations in the international market. It also said the RON 97 petrol price in the domestic market would be capped at RM2.70 per litre this year.
Yeah said a “small increase” in the overnight policy rate at Bank Negara’s monetary policy meeting on Monday would be appropriate to keep up with the current inflation trend.
“But we will not be surprised if the central bank maintains the rate this Monday, seeing that the global oil price has come off its peak and the pump price has been reduced,” he said.
The last time the central bank raised rates was in April 2006.
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