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©The Star (Used by permission)
by V.P. Sujata

PUTRAJAYA: The Consumer Price Index (CPI) for June spiked to a 27-year high of 7.7%.

This figure is slightly more than double the May CPI of 3.8%. The 7.7% is also the highest since April 1981 when the CPI was recorded at 10.8%.

The substantial rise in the price of petrol and diesel announced by the Government beginning June 5 is the main reason for the surge, said Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad.

He said the inflation would probably remain at 7.7% for July because it would see the impact of increase in the electricity tariff.

Reading a report by the Statistics Department, he said the CPI for January to June this year had also increased by 3.7% compared with the same period last year, which was from 105.1 to 109.

Index for food and non-alcoholic beverages for June compared to the same month last year showed high percentage change of 10.0% while the index for non-food increased by 6.7%.

From January to June, index for food and non-alcoholic beverages increased by 6.1% and non-food 2.6%, while among the groups with high weights were transport (+4%), and housing, water, electricity, gas and other fuels (+ 1.4%).

The 6.1% increase in the index for food and non-alcoholic beverages was the result of increases in the index for items such as milk, cheese, eggs, rice, bread, cereals, meat, vegetables, seafood, fruits, sugar, jam, honey, chocolate, confectionary and fats.

Among the food items that recorded notable increase in the June index were tomatoes, chicken eggs, rice, glutinous rice, imported beef, beehoon, dried noodles, watermelon, carrots, chicken and wheat flour.

Speaking to reporters at his office here yesterday, Shahrir said his proposal to have a dedicated agency to help efficiently distribute subsidised goods to rural folks would be submitted to the Cabinet in two to three weeks.

“There is not much we can do for the price pressures but more fine-tuning of a distribution system to ensure subsidised goods reach the target group is vital,” he said.

He said he was looking to increasing the number of food items on the price-control list to help the lower income group.

Food items on the list now were only general-purpose flour, cooking oil, white bread and rice.

The basket of goods for calculating the CPI is done twice in five years with the last one in 2005, he said, adding that it has to be expedited to be more reflective of the market conditions.

Shahrir said an average of 10 billion litres of diesel was being used annually with about 50% being subsidised by the Government.

Inflation likely to remain high

by Joseph Chin

PETALING JAYA: The country's inflation rate, which surged to a 26-year high of 7.7% in June, is expected to be sustained at high levels over the next few months, fuelled by the new power tariffs which took effect this month.

An economist with a local research house said yesterday he expected inflationary pressure to be sustained and consumer price index (CPI) to peak at 8% in October.

He said the CPI was expected to decline in November and December at 7.6% due to the higher base effect.

He said the rising inflationary pressure might see Bank Negara increasing the overnight policy rate (OPR), now at 3.5%, at its monetary policy meeting tomorrow to rein in the rising inflation.

On July 9, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said the CPI in June was expected to exceed 6% because of adjustments to the petrol and diesel prices by 40.6% and 63.3% respectively.

Kenanga Investment Research economist Wan Suhaimi Saidi said there was a 50:50 chance that interest rates would be increased.

He said central banks in the Philippines, Thailand and Indonesia had also hiked their interest rates.

“If Bank Negara does not increase the OPR at the Friday meeting, it is likely to increase the rate in August by at least 25 basis points,” he said.

He pointed out that Malaysia’s interest rates were still among lowest in the region and it had room to increase.

Yesterday, the Statistics Department said the CPI surged to 7.7% in June, mainly due to the sharp increase in prices of petrol and diesel which took effect from June 5.

The Statistics Department said yesterday the consumer price index (CPI) for May rose from 105.3 to 113.4 from a year ago. This was the highest since January 1982 when the CPI rose 7.8%.

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