Malaysia’s annual inflation likely crept higher in November on the back of higher food prices, but still low enough for the central bank to hold its key interest rate steady at next month’s meeting, economists polled by Reuters said.

The consumer price index likely rose 1.4 percent in November from a year earlier, quickening from a two-year low of 1.3 percent year on year during September and October, a median forecast of 16 economists showed.

The forecasts ranged from 1.0 percent to 1.7 percent.

Malaysia’s inflation is still among the lowest in the region, having declined steadily from a peak of 3.5 percent in mid-2011, allowing Bank Negara to maintain loose monetary conditions to support expansion.

The bank kept its key interest rate unchanged at 3.0 percent for the ninth consecutive time at its meeting last month, saying its stance was “accommodative and supportive” of the economy.

Bank of America Merrill Lynch economist Hak Bin Chua said that while food prices may have climbed in November, government subsidies on fuel have kept a lid on transport and electricity

prices.

The government, which must call a national election by April, keeps a tight rein on prices of household items ranging from cooking oil to sugar.

Inflation could creep up next year as the administration begins to unwind the subsidy regime after the election, and as the global outlook improves.

“We look for inflationary pressures to start creeping up higher in 2013, which could potentially tilt the balance towards a tighter monetary policy especially if the global economy were to outperform expectations,” said OCBC economist Gundy Cahyadi.

- Reuters