Business life: My finance news blog

Malaysia's central bank, expected by economists to raise interest rates tomorrow, said it will assess the risks to economic growth as well as the outlook for inflation before making a decision.

The case for raising borrowing costs is “less clear'' in some countries than in others, Governor ZetiAkhtar Aziz said today in Kuala Lumpur. Bank Negara Malaysia has left the benchmark overnight policy rate at 3.5 percent since April 2006.

“There have been mixed assessments both in developed as well as developing countries,'' Zeti said. “For countries that had strong growth and overheating conditions, as well as high inflation, the solution was very clear for them to raise interest rates. We will consider all the factors and take a decision that is in Malaysia's best interests.''

Central banks in the region, including Indonesia and the Philippines, have boosted borrowing costs to battle inflation at the risk of curtailing growth as a U.S. slowdown hurts exports. Inflation in Malaysia accelerated to a 26-year high of 7.7 percent in June, and Credit Suisse Group AG said today rates may be raised tomorrow, earlier than it previously forecast cash advance in one hour payday advances.

Last month's 41 percent increase in gasoline prices has fanned inflation in Malaysia, where the government is attempting to cut fuel subsidies and trim the budget deficit.

So-called second-round inflation, where higher food and oil costs spread to other goods and services, as well as wages, may be “highly damaging,'' Zeti said.

“We are going to look at what are the risks to the inflation outlook, whether it is going to increase and continue to increase in an extended period of time, or whether there will be other mitigating factors,'' she said. “We will also look at what is the risk to moderation in our growth outlook.''

Higher borrowing costs in Malaysia may weigh on consumer spending, which the government is relying on to sustain economic growth as exports to the U.S. slow.

Zeti has said she expects economic growth to drop to about 5 percent this year from 6.3 percent in 2007.

Source