Malaysia’s annual inflation rate likely ticked up in February on higher food costs and healthy consumption demand, but government subsidies on household items and fuel would have prevented any spike in the index, a Reuters poll showed.

The median forecast of 15 economists polled by Reuters for February’s rise in consumer price index was 1.5 percent on year compared with January’s modest 1.3 percent. The forecasts ranged from 1.4 to 1.7 percent.

“The culmination of strong consumption demand and firm food costs should underpin price pressures, although existing food  and fuel subsidies should cap the extent of related cost increases,” said Forecast Pte economist Bernard Aw in Singapore.

The timing of the Lunar New Year holiday - celebrated in February this year and January in 2012 - had built a low base for seasonal price increases, distorting actual inflation trends, analysts said.

Many economists anticipate Malaysia’s inflation rate will increase in coming months due to the newly-implemented minimum wage policy, bonus payments to civil servants and cash handouts ahead of elections, which must be held by late June.

In the second half, the inflation pace could be increased by the removal of some consumer subsidies.

On March 7, Malaysia’s central bank held its key interest rate steady at 3.00 percent, as expected, saying its current monetary stance is appropriate and in line with the country’s growth and inflation outlook.

- Reuters