VRF

If you know the acronym for WTF, figuring out VRF shouldn't be difficult.

Reuters reported that Malaysia's yearly inflation rate will be averaging out 4.5%, well above the central bank's previous forecast of 2.5%-3.0%. In the same context, AFX news reported that official data by the central bank shows that would be the highest inflation for any year since 1998, during the Asian financial crisis, when inflation averaged 5.3%. The central bank governor, Zeti Akhtar Aziz saw inflation rising above 5%in June and peaking around 5.3%early in 2009. The latest official figures showed inflation hit a 15-month high of 3%in April. But she said there was no rush for the central bank to consider raising the policy rate of 3.5%. At its last review on May 26, the central bank left rates on hold. The central bank projected that the inflation in the first half of 2009 would be around 5%, and peaking early in 2009, she said.

In short, since the revise for petrol price, inflation rate will hold on to an average 5% or more from now till next year 2009 June. That's one year for you.

Before the announcement of the revision for petrol price, inflationary rates was already in a 13-mth high at 3% in March 2008 and soared further to 3.5% in April 2008.

Bleak?

A standard fixed deposit interest rate in any local Malaysian banks only provides 3% per annum for 1mth's deposit. If we keep it for 12mths, the bank will give us a 3.5% p.a interest rate.

EPF for the year 2007 announced a dividend payout of 5.8%.

Now, what does all this means to us?

If we keep our money in the bank's FD, we're actually losing at least 2% of our money's worth. In another words, to keep the money with the bank, we're actually giving the bank back with 2%. Which also means, all the hard earned money kept in the bank are almost 'worthless' as these money are losing it's real values.

What about EPF? For all the 'hard work' done by EPF, they're actually earning 0.8% for us.

The last time we had a 5.3% inflationary rate was when the country suffered the 1998 Asian Financial Crisis, and the central bank has projected that early next year 2009, we're going to be hit with that 5.3% inflationary rate.

What does all this means? In short, VRF!


* FD rates in New Zealand & Australia are around 7-9%.