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Malaysia January inflation to ease [22-02-2012]  
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MALAYSIA'S inflation level in January should ease from December but the timing of the Chinese Lunar New Year holidays may cause some distortion to the Consumer Price Index reading, said economists.

A Business Times poll expects the Consumer Price Index to grow by an average of 2.74 per cent.

The Statistics Department will release the details this afternoon.

DBS Bank economist Irvin Seah said the main reason is a slowing growth momentum, which should see gradual easing in the domestic demand-pull inflation.

"External dis-inflationary pressure is also present given the weak global demand.

"Although there is risk of a spike-up in global oil prices due to the rising political tension in the Middle-east, Malaysia will be less affected given that it is after all a net oil exporter," he said.

Overall, he expects inflation to remain stable at about 2.5 per cent throughout the rest of the year.

This, he said, should provide enough room for Bank Negara to lower policy rate in event of a sharp deterioration in global outlook, which could affect Malaysia's growth performance.

Dr Chua Hak Bin of Bank of America Merrill Lynch thinks inflation may however be distorted by the timing of Chinese New Year holidays, which was in January this year versus February last year.

"Food prices may as result pose upside surprise, although the government tried to introduce ceilings on certain food items."

Lower inflation readings may open the room for monetary policy easing at Bank Negara's March meeting. Citi also thinks food prices will be kept elevated though price pressures could be kept in check by government food price controls and subsidies.

The doubling of sugar subsidies at the end of January will likely have a negligible effect, it added.

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