Malaysia Posts Second Month of Deflation as Growth Risks Rise

(Bloomberg) -- Malaysia recorded a second month of deflation in February as fuel prices dropped, a worry for policy makers at a time when economic growth is also under pressure.

Consumer prices fell 0.4 percent from a year ago after dropping 0.7 percent in January, the statistics agency said in a report on Friday. The last time Malaysia was in deflation was in the aftermath of the global financial crisis in 2009, when the economy was in recession.

The drop in prices has fueled speculation the central bank will be among the first in Southeast Asia to cut interest rates this year. Growth risks are also rising in an economy that’s so far been buoyed by resilient exports, with a slowdown in China and broader global demand pressures set to limit expansion.

Malaysia’s government has said the decline in prices is due to temporary factors, such as fuel costs, and not a sign of falling demand or recessionary factors as in 2009. The central bank left its key rate unchanged at 3.25 percent in March, saying inflation will remain low for now.

--With assistance from Michael J. Munoz.

To contact the reporter on this story: Michelle Jamrisko in Singapore at mjamrisko@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Karthikeyan Sundaram

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