Sudden inflation hike puts Southeast Asian central banks on edge

SINGAPORE (March 2): After more than a year of disinflation, price pressures are quickly mounting across Southeast Asia as fuel costs rise, putting central banks on watch after years of policy easing.

In Malaysia, consumer prices rose at the fastest pace in almost a year in January and economists see that as closing the door on another interest-rate cut this year even though the economy could do with more stimulus. From Singapore to Thailand, central banks are bracing for faster inflation.

The recent spike has been mainly caused by oil prices, which have surged 25% in the past six months. In a region where countries like Indonesia have been prone to high inflation in the past, and currencies are vulnerable – notably in Malaysia – central banks will need to monitor closely for any signs that rising fuel costs are spreading more broadly to prices in the economy.

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