Bank Negara keeps inflation projection between 2.5pc-3.5pc
KUALA LUMPUR: Bank Negara Malaysia is maintaining its inflation rate projection between 2.5 per cent and 3.5 per cent this year, despite mounting inflationary pressures.
"We have already made a projection between 2.5 per cent and 3.5 per cent and our expectation is that it will be closer at the higher end of the projection.
"This (projection) has taken into account some of the adjustments to be made along the way. Should the adjustment exceed what we have priced in, there may be a need to make a revision," Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz told a press conference here yesterday.
She was asked whether Bank Negara would revise the inflation rate, given that the government would review fuel subsidies next month.
The Statistics Department yesterday announced that the consumer price index (CPI) for April stood at 3.2 per cent from a year ago, driven by higher food and transportation prices.
Zeti said the headline inflation rate as measured by the change in the CPI, rose by 2.8 per cent on an annual basis in the first quarter of 2011. This was due primarily to the increase in global commodity and food prices.
"The increase in consumer prices was contributed largely by the food and non-alcoholic beverages category, which rose by 4.3 per cent.
"Prices in the transport category also registered an increase of 4.4 per cent in the first quarter, due to an upward adjustment in the price of RON97 in January and February as a result of higher global crude oil prices," she explained.
On whether the stronger ringgit against the US dollar would help mitigate rising inflationary pressure, Zeti said it would, but the central bank does not rely on such a policy.
"We don't rely on the exchange rate to mitigate inflationary pressure because of the volatile nature of the exchange rate. It could reverse," she said, adding the only instrument for monetary policy is interest rate.
On whether Bank Negara is comfortable with its overnight policy rate, she said the current level was appropriate for prevailing economic conditions.
Zeti acknowledged that rising crude oil prices are a big challenge to global economies.
"We are the beneficiaries of rising commodity prices because of export earnings. But at the same time, the higher crude oil prices like what happened in 2008 where the price reached US$147 per barrel, will dampen and affect both consumers and businessmen.
"We have stabilised at RM110 per barrel but if the price reaches the 2008 level, this represents a risk to growth," she said.
"We have already made a projection between 2.5 per cent and 3.5 per cent and our expectation is that it will be closer at the higher end of the projection.
She was asked whether Bank Negara would revise the inflation rate, given that the government would review fuel subsidies next month.
The Statistics Department yesterday announced that the consumer price index (CPI) for April stood at 3.2 per cent from a year ago, driven by higher food and transportation prices.
Zeti said the headline inflation rate as measured by the change in the CPI, rose by 2.8 per cent on an annual basis in the first quarter of 2011. This was due primarily to the increase in global commodity and food prices.
"The increase in consumer prices was contributed largely by the food and non-alcoholic beverages category, which rose by 4.3 per cent.
"Prices in the transport category also registered an increase of 4.4 per cent in the first quarter, due to an upward adjustment in the price of RON97 in January and February as a result of higher global crude oil prices," she explained.
On whether the stronger ringgit against the US dollar would help mitigate rising inflationary pressure, Zeti said it would, but the central bank does not rely on such a policy.
"We don't rely on the exchange rate to mitigate inflationary pressure because of the volatile nature of the exchange rate. It could reverse," she said, adding the only instrument for monetary policy is interest rate.
On whether Bank Negara is comfortable with its overnight policy rate, she said the current level was appropriate for prevailing economic conditions.
Zeti acknowledged that rising crude oil prices are a big challenge to global economies.
"We are the beneficiaries of rising commodity prices because of export earnings. But at the same time, the higher crude oil prices like what happened in 2008 where the price reached US$147 per barrel, will dampen and affect both consumers and businessmen.
"We have stabilised at RM110 per barrel but if the price reaches the 2008 level, this represents a risk to growth," she said.
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