How Malaysia Manage Inflation

Since the Central Bank has the exclusive right to issue money in the economy, it can have extensive influence on the determination of interest rate in financial markets and in the economy as a whole, by adjusting the interest rate on short-term loans to financial institutions. Central Bank interest rates on these loans therefore have the most immediate impact on other short-term interest rates in the money market. By influencing interest rates, monetary policy then has an effect on the savings and expenditure decisions of individuals and corporate.

Inflation doubled in 2007 and reached a peak at 28% in 2008.The fiscal make up 4-5% GDP and the trade deficit accounted for 20% GDP in which approximately $US17.5 billion dollars. The influence of high fuel combine with food prices and high domestic demand lead to high inflation. The high price of fuel in Vietnam illustrates global fuel prices and the high domestic demand of country importing fuel. Furthermore, the increase in global food prices affect detrimental to the high inflation in Vietnam.(Figure 2)

1. What is inflation? Inflation is an increase in prices for goods and services (What is Inflation?).

If the economy suffers from inflation, the Government will like to check it. Then its Central Bank should adopt tight or contractionary monetary policy. To control inflation the Central Bank of a country can reduce money supply through open market operations by selling bonds or government securities in the open market and in return gets currency funds from those who buy the bonds. In this way liquidity in the banking system can be reduced.

Is a requirement that banks maintains price stability, full employment, and economic wealth to all the people living in Australia. The achievement of these laws might be sometimes subjective because of the market’s volatility, but the bank tries to seek for their inflation target to keep consumers price with a two to three percent of inflation. Allocating the inflation conserves the value of the money and for a long run creates an expansion over the economy.

In 2015 Australia had an inflation rate of 1.70% (Australia Inflation rate, 2016) and Indonesia’s was 4.45% (Indonesia inflation rate, 2015). The inflation rate is the level at which the prices for goods and services are rising. It is apparent that inflation is effecting Indonesia more drastically, causing an increased in the cost of goods and services. Indonesia’s high inflation rate correlates with their Consumer Price Index. This being the case, the cost of living is more expensive in Indonesia than in Australia, which effects the living standards.

The supply for oil is way more than its demand, causing the prices over the U.S. to continually fall. The Federal Reserve plans on monitoring inflation, and they hope to get it to decrease back to its original expected

On the contrary, the government can increase spending if a recession is close or already happening and can lead to increased employment nationally. The central bank’s monetary policy can help by varying interest rates. They can lower interest rates to increase spending and raise them to decrease spending. To decrease inflation, the banks can reduce the supply of money, therefore giving citizens the incentive to spend less money and in turn, reducing the inflation.

Monetary policy, ‘The government’s policy relating to the money supply, bank interest rates, and borrowing’ (Collin: 130), is another tool available to the government to control inflation. Figure 4 shows, that by increasing the interest rate (r), from r1 to r2, the supply of money (ms) is reduced from Q1

“The money market fulfils the borrowing and investment requirements of providers and users of short-term funds, and balances the demand for and supply of short-term funds by providing an equilibrium mechanism” (Money Market in India, 2017). It serves as a mechanism through which central bank's intervention in the

The impact of the change interest rates and inflation has a persistent impact on the well being of any given society. For this purpose it is the understanding that each individual in society should have an understanding of what such changes bring fourth for the man on the street. In this introduction, we are going to introduce certain key points to remember when dealing with interest rate- and inflation changes.

Inflation is blazing subject that delays the economic development of the country. It is becoming extra hectic to economists, politicians and even people also. Factors on both demand and supply effect the inflation. So the stabilization strategies ought to consequently focus on both demand manipulation as well as

In terms acceleration of economic growth is based on the measurement of GDP, MALAYSIA HAS recorded a growth of 5.1% last year. Although it is lower than 7.2% in 2010, but it was so roaring in the context of a difficult global economic environment and uncertainty. In contrast, global economic growth has dropped from 5.2% in 2010 to 3.8% in 2011 while the economy of the developed countries like USA, Germany, UK, France and Japan also recorded weak growth of respectively 1.5%, 2.7%, 1.1 %, 1.7% and -0.5% in the same year; far lower than Malaysia's achievements. Following a satisfactory GDP growth was assisted by the Federal government revenue increased by RM13.2 billion in 2011 through increased collection of IRB estimate of RM109.7 billion compared with RM96.5 billion the government has managed to reduce its fiscal deficit to 5.0% compared projection of 5.4%. This means that the GOVERNMENT has successfully steered the nation's economy as well as the control and management of public funds wisely in the past 3 years in a row when managed to bring down the fiscal deficit from 7.0% in 2009 to 5.6% (2010) and 5.0% in the past year in a expanding economy.

Today, its vital role in commercial banking activities lie in the direct effect it has on total economic growth and business development. Every year the (CBN) central bank of Nigeria being the monetary authority that is solely responsible for the insurance of guidelines policies and the interpretation of such, comes up with economic measure roles and regulation under which the bank in the country operate. Such policies direct the use of funds from depositors, stockholders, and creditors in order to control the size of loan portfolio thereby determining the general circumstances under which it is appropriate to make an advance. The monetary policies also aim at aiding the banks to maintain a sound financial and banking system promote confidence in sustenance of reasonable banking services for public as well as ensuring a high standard of conduct and professionalism in banking industry. These rules and regulations are contained in monetary policy circular being issued by the central bank at the beginning of every year.

Budgetary cycle in Malaysia, consist of four stages which are planning, budget preparation, budget implementation and budget evaluation. In first stage, government organisations are accountable in planning the budget target. Also, they require planning activities and programs for following year with efficiency. Second stage, budget is prepared and approved. Third stage, after Parliament has been approved the budget; a General Allocation Warrant to the Accountant General’s office will issue by the Finance Minister. It is as an authority for Accountant General’s office to expend the consolidated funds required for the expenditure. Government organisations are accountable to keep all accounting records in a vote book; so that, the allocation gets control and the expenditure occurred has been account. Fourth stage, the final of budgetary process cycle, Accountant General’s Department, Auditor General’s Department, Parliament and others will involve. According to the Federal Constitution Article 106 and 107, all public accounts have to be audited by the Auditor General’s Department and must be presented in Parliament. Thus, government organisations shall be update and present all information to the Auditor General with accurately and completely to ensure that there is no misuse of public fund. Auditor General will audit, examine and evaluate the financial performance of the government organisation’s