Malaysia's inflation rate could hit seven percent in June in a "one-off" hike, a senior minister warned Monday following the recent 41 percent rise in fuel prices.
Nor Mohamed Yakcop, second finance minister, said for June and July, inflation could be slightly higher, reflecting the rise in the cost of goods, after June's fuel price increase.
"This is a one-off inflation as oil prices have gone up ... food prices have gone up. It is a cost-pushed inflation," he said.
But Nor Mohamed was confident inflation for 2008 would be contained at five percent.
"My own feeling as a whole is that inflation will be contained. In my own expectations -- not more than five percent for the year as a whole," he was quoted as saying on private TV3 television.
The central bank has said the June inflation rate is expected to surge above six percent due to the fuel price hike, raising speculation that rates will be hiked.
Economists expect the central bank to announce an increase in borrowing costs by 25 basis points at the end of July to counter a jump in inflation, when it holds its monetary policy.
Malaysia's key interest rate now stands at 3.50 percent.
Prime Minister Abdullah Ahmad Badawi last month announced a deeply unpopular 41 percent increase in petrol prices to cut the country's subsidies bill, which would have reached 17 billion dollars this year.
May's inflation rate rose to a 22-month high of 3.8 percent from 3.0 percent in April and 2.8 percent the month earlier, driven by higher food prices, while for the first four months of the year, it averaged 2.7 percent.
Agence France-Presse - 7/21/2008 11:15 AM GMT