Malaysia Jan CPI rises by 2.7pc

KUALA LUMPUR: The Consumer Price Index (CPI) for January rose by 2.7 per cent, an indication of easing inflationary pressures in Malaysia.

The pace of growth from 101.8 to 104.5 was within market expectations, which pointed to a slowing growth momentum.

The Statistics Department said yesterday the index increased by 0.3 per cent when compared to December.

Bank of America Merrill Lynch economist Dr Chua Hak Bin said food prices have been kept in check during the Lunar New Year holidays in late January.

The 13 food items placed under price control from mid till end January included chickens, eggs, cabbages, shrimps and pork.

"We expect inflation to average 2.6 per cent in 2012, down from about 3.2 per cent in 2011."

Chua expects the biggest inflation risk for 2012 to be the timing and magnitude of any fuel subsidy cuts but this is only likely to occur after the general elections.

"We think there is a slightly higher than even possibility that Bank Negara Malaysia will cut the policy rate by 25 basis points at the upcoming March meeting, bringing the policy rate to 2.75 per cent."

Inflation pressures are easing and slowing external demand will likely see growth fall below 5 per cent in the first quarter.

Bank Negara's recent policy statement was more dovish and balanced, providing room for a possible rate cut.