Malaysian annual inflation soared to 8.5 percent in July, way above analyst forecasts for 7.8 percent in a Reuters poll, and sharply up from 7.7 percent in June.
The July data was the steepest rise since 8.5 percent in December 1981 and the government also on Friday announced that the price of petrol will be cut to 2.50 ringgit per litre from 2.70 effective Aug. 23, a move which will dampen inflation.
It was unpopular petrol price hikes in June and electricity price rises in July that catapulted inflation from 3.8 percent in May.
The cuts in fuel prices were brought forward from Sept. 1. and will now take effect before a key by-election in which opposition leader Anwar Ibrahim challenges the government.
Despite the surge in inflation, Malaysia’s central bank, alone in southeast Asia, has kept interest rates unchanged for over two years at 3.5 percent.
Governor Zeti Akhtar Aziz has said slower economic growth and weakening commodity prices would help reduce price pressures ahead, especially next year.
Bank Negara Malaysia meets again on Monday to decide on rates after it surprised markets in July by leaving rates unchanged.
According to some economists, that decision damaged its credibility and showed it had buckled under government pressure to refrain from a hike at a time when the ruling coalition felt threatened by an opposition alliance which has surged in polls.
(Reporting by Soo Ai Peng, Li Lian Loh, Niki Koswanage, Faisal Aziz; Editing by David Chance and Tomasz Janowski )