July 25 (Bloomberg) -- Malaysia’s central bank said addressing accelerating inflation is “critical” as rising prices would undermine growth prospects.
Price gains in Malaysia are largely due to “very high” energy and commodity costs, Bank Negara Malaysia Governor Zeti Akhtar Aziz told reporters in Kuala Lumpur today. It is important to increase food supply and distribution networks, as well as ensure the availability of raw materials such as fertilizers and feed, she said.
“All these efforts will rein in the amount of the rate at which our inflation will increase,” Zeti said. “This is something we really want to address so that it doesn’t undermine our future prospects. That is very critical because in countries where inflation rises without having any check, then we can see that it will undermine the sustainability of our future growth.”
Malaysia’s inflation accelerated to the fastest pace in more than two years in June after power tariffs were raised. Bank Negara kept interest rates unchanged at its July meeting and Zeti said last week borrowing costs remain “quite low.”
Higher costs of food and fuel are “very much felt” now, Zeti said today. World food prices climbed to near a record in June as the cost of sugar, meat and dairy increased. An index of
55 food commodities rose to 233.8 points from 231.4 points in May, according to the United Nations’ Food and Agriculture Organization. The gauge reached an all-time high of 237.7 in
February.
“A lot of attention is being focused now on dealing with inflation because this erodes purchasing power,” Zeti said. Malaysia’s consumer prices rose 3.5 percent from a year earlier in June, government data show.
Bank Negara left the overnight policy rate at 3 percent on July 7, after raising the benchmark four times since early March 2010. Consumer prices may climb 2.5 percent to 3.5 percent this year from 1.7 percent in 2010, the central bank said in March.
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