Remember the immediate previous post about deflation in Malaysia and how it was expected to succumb to inflation later in the year?
Yesterday, being a centrally-planned economy that Malaysia is, the Cabinet decided against a hike.
KUALA LUMPUR, July 22 — Malaysia’s government today vetoed price hikes for electricity and natural gas, fearing a repeat of anti-government protests that saw its popularity slump in 2008.
Under proposals discussed by the cabinet today, the country’s influential Economic Planning Unit had suggested a 24.6 per cent rise in the price of natural gas and a 4.9 per cent hike in electricity prices from Aug. 1 to reflect the rising cost of energy. [Malaysia government rejects energy price hikes. Bernama via The Malaysian Insider. July 22 2009]
I am not sure if inflation will come back as soon as analysts predicted earlier. I know, I know, they based the return on the expected hike of taxi and bus fare hike. But I think this decision can potentially affect inflation expectation in a way that prolongs the deflation.
