The latest hike in petrol prices has sparked off a new round of price increases in consumer goods.
The painful nips have sent consumers at large practically squeezed out, making their spending power a lot weaker. Next in the pipeline to go up is our CPI (Consumer Price Index) which is a measure of our inflation.
Our inflation is projected to spiral in the months to come. This is going to pressurise our Bank Negara to review its monetary policy to tame the worsening inflation.
But the present wave of price increases is triggered not by demand-pulled factor - it is ignited by the suppliers jacking up the prices. As such, it may not be effective to raise interest rate to moderate the inflation.
To let Ringgit to appreciate further may help, but our exporters may feel the pinch.
BNM has to be smart in its policy-making to help our nation to tide over the present predicament.
The present framewotk allows our government to review the petrol prices on monthly basis. If the geopolitical tension in the Middle-East turns nasty, the ultra-sensitive oil price may easily rocket ceiling-high to US$200 per barrel. Under the present structure, our petrol prices would float in tandem.
Let's hope for the best.
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