Posted on 28 Mar 2012
Overall prices for February as measured by the consumer price index (CPI) rose 2.2% to 104.5 from a year ago largely due to an increase in the prices of food and non-alcoholic beverages after climbing 2.7% in January.
Data released by the Statistics Department showed that when compared to the previous month, the CPI remained unchanged.
The year-on-year increase was marginally lower than the median estimates of a Bloomberg survey of economists at 2.4% and showed that inflation continues to trend lower.
The index for food and non-alcoholic beverages and non-food for the month of February showed year-on-year increases of 2.9% and 1.8% respectively.
Economists are now leaning towards no easing of monetary policy by the central bank as oil price has risen nearly 37% since early October to hover at US$105 per barrel for West Texas Intermediate while Brent has jumped some 30% to trade at US$120.
Bank Negara, which has kept the benchmark overnight policy rate steady at 3% since last May, recently revised gross domestic product growth downwards to between 4% and 5% from the previous official estimate of 5% to 6%.
Citigroup Inc senior economist Kit Wei Zheng said in a report released shortly after the CPI data was made available that lingering inflation risks would further give pause to any inclination to cut rates.
He pointed out that this was especially so should there be a sharp spike in oil prices, which would then force the Government to bring forward subsidy rationalisation in spite of imminent elections.
Kit said the recently announced 7% to 13% hike in civil service wages could also raise core inflation pressures via domestic demand, as appeared to be the case with past civil service wage hikes.
Even then, he said, any rate cut must be weighed against potential upside risks to inflation and the build-up of financial imbalances.
