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Malaysia’s Inflation Accelerates, Remains in Expected Range

Malaysia’s inflation accelerated in October, a pace that remains within the central bank’s expected range for 2010 after three interest-rate increases this year.

Consumer prices rose 2 percent from a year earlier after gaining 1.8 percent in September, the Putrajaya, Malaysia-based statistics department said in a statement today. That compares with the median forecast for a 1.9 percent increase in a Bloomberg News survey of 15 economists.

Malaysia left interest rates unchanged at its past two meetings after raising borrowing costs before any other Asian central bank this year. Governor Zeti Akhtar Aziz said this week sustaining growth will be a bigger challenge in 2011 than containing inflation.

“We believe that inflation is likely to rise modestly in the coming months on rising commodity and food prices,” Rahul Bajoria, a Singapore-based economist at Barclays Plc, said before the report. “This, however, is unlikely to result in any sharp reaction from the central bank.”

Malaysia’s key interest rate at 2.75 percent is “very supportive of economic activity” and inflation is not seen as a “major threat” next year, Zeti said on Nov. 22. The government last month said inflation is expected to be “moderate” and stay below 3 percent in 2011 after probably remaining in a “benign” range of between 2 percent and 2.5 percent this year.

“Unless inflation spikes higher,” the central bank will likely keep rates unchanged until late in the second quarter of 2011, Bajoria said.

Food prices, which account for about 31 percent of Malaysia’s inflation index, rose 2.8 percent in October, today’s report showed. The cost of housing, utilities and fuels gained 1.4 percent. Transport increased 2 percent.

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