Malaysia's central bank could review rates amid price rises

Malaysia's central bank could review rates amid price rises

Thu, 12 Jun 2008 16:04 HKT

KUALA LUMPUR (AFP) -- Malaysia's central bank could review its interest rates as rising prices and a fuel price hike is expected to push up inflation and slow growth for the year, its governor said on Thursday. Bank Negara governor Zeti Akhtar Aziz said the central bank would "study carefully" the impact of the fuel price rise on inflation and the effects of stimulus packages being introduced to soften its impact. "All this will be assessed very carefully in the months to come as we determine our monetary policy response," Zeti was quoted as saying by the state Bernama news agency. "We have to make a careful assessment whether this (price rise) is passed on to consumers. When that happens, then you have the inflation when there is a generalised price increase," she added. Zeti said it was still too early to determine if the rise in fuel prices was being passed on directly to consumers. Prime Minister Abdullah Ahmad Badawi last week raised the price of fuel by 41 percent to 2.70 ringgit (0.84 dollars) per litre, sparking fears of inflation amid spiralling crude oil and food costs worldwide. Abdullah said inflation was expected to reach as high as 5.0 percent this year following the fuel price hike, while growth is projected at a slower pace of 5.0 percent from 6.3 percent last year. The government has been scrambling to cushion the effect of increased fuel prices by giving cash rebates to car owners and announcing a slew of cost-cutting measures to help them cope. On Wednesday he said the government would not raise fuel prices again this year. Last month, the central bank said the country's key interest rate would remain unchanged at 3.50 percent. Inflation edged up to 3.0 percent in April from 2.8 percent the month earlier, driven by higher food prices, while for the first four months of the year, inflation averaged 2.7 percent.