Malaysia inflation has peaked: Zeti

Zeti Akhtar Aziz, Malaysia’s central bank governor, comments on growth, inflation and Islamic finance. She made these remarks to reporters in Kuala Lumpur today.

On Malaysia’s economy and interest rates:

“The domestic economy is particularly strong. Consumption demand and foreign direct investment is improving this year and our inflation has peaked and stabilized. Although there is still food inflation, this has to be addressed by other measures other than interest rates.”

On whether inflation or growth is a bigger risk:

“There are always risks on the horizon for both because we are an open economy. If there is a sudden shortage of commodities or energy as we saw earlier, this causes energy and commodity prices to rise sharply and if they do, it will affect our rate of inflation. Or if there are disruptions in supply of food, it will cause food prices to rise. So there is always a risk of higher inflation.

“Given this on-going financial crisis, if it were to deteriorate beyond the current circumstances, yes it is going to be a risk to our growth.”

On whether Islamic finance is insulated from current global economic and debt crisis:

“Islamic finance is insulated by the first-round effect because it is more resilient. It is totally linked to the real economy and there are built-in checks and balances in profit- sharing, therefore more responsible lending. But of course, if companies slow down and financial markets get corrected, this will affect financial institutions.” -- Bloomberg