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Important Notice: Jang Group of Newspapers web site can be accessed only by using http://www.jang.com.pk and http://www.jang-group.com Malaysia sees higher inflation KOTA BARU, Malaysia: Inflation in Malaysia is expected to double this year to 2.5-3.0 per cent but there is no need to raise interest rates, Malaysian economic planning minister Mustapa Mohamed said on Saturday. The inflation outlook is higher than the central banks previously published outlook of 2.5 per cent this year, after prices rose 1.4 per cent last year. Asked if Malaysia would consider raising interest rates, Mustapa told Reuters: "I dont think so. Inflation of 2 to 3 per cent is very small." Investors dumped Malaysian government bonds in a two-week selling spree last month, pushing benchmark yields about 30 basis points higher, after the central bank chief said interest rates were significantly below neutral level. Mustapa said the government might raise retail petrol prices if crude oil prices topped $60 a barrel. "At present, there is no decision yet to revise current our pump prices," he added in an interview in Kota Baru, the capital of his home state of Kelantan. Wearing traditional Malay dress, the Australian-trained economist spoke between meetings in the rural state near the Thai border that is ruled by the fundamentalist Islamic opposition party PAS. Malaysia has raised fuel prices in the face of high oil costs but still faced a heavy subsidy bill of more than $1 billion last year to sustain some of the lowest pump prices in the region. The government is concerned the subsidies will hamper its plans to cut its fiscal deficit at a time when economic growth is also slowing.
Mustapa, 54, said current subsidies were tolerable for now, after a diesel price hike in March, but were not sustainable long-term. "You see what has happened in Thailand and Indonesia, they have been forced to increase prices," he said. "We are not going to do away completely with subsidies. If prices go up and up, we have got no choice but to share some of this burden with the consumers.&q...