The removal of the ringgit peg will not have an immediate significant impact on the micro economic level, said former Hong Kong-based Morgan Stanley senior economist Alex Ong.

"No panic reaction is expected at the consumer level because the change was just about 2%. On the micro level, the impact was not much but on the macro level it might have a slight impact" he said when contacted today.

He said the price hike in consumer products over the past months was much higher than the 2% change brought about by the unpegging.

"See vegetables for example, the price hike for the last couple of months was about 20 to 50%. In comparison with the 2% changes in the peg, it was very negligible," he said, adding that the government should improve economic productivity.

Good news

Another economist, who declined to be named, said the unpegging was good news for ordinary consumers.

"When you go overseas, you'll have a stronger ringgit and so you'll be able to spend a bit more. It will also be cheaper to finance your children who are studying overseas," he said in an e-mail communique.

Yesterday, following the Chinese central bank's decision to scrap the 11-year peg on the Yuan to the US dollar, Bank Negara said it will also unpeg the ringgit immediately and allow it to operate in a managed float.

The peg was implemented seven years ago in the aftermath of the Asian financial crisis.

Ong said the unpegging would not have significant impact against the high inflation rate.

However, the other economist told malaysiakini that it will nevertheless help to reduce it to a certain extent.

"But I don't think the peg was removed just for that. And I don't think imported inflation was that high. For example, oil prices have gone up and all countries are affected.

"Secondly, we have been doing some things of our own to spur inflation, like raising salaries of police personnel and civil servants," he added.

Over the past few months, the inflation rate had been inching up, even reaching a six-year high in June which was 3.2%.

Smart alternative

Meanwhile, Ong said the unpegging will see a slight impact on export-oriented products because of the increase in production costs.

"The immediate impact will be on those dealing with US dollars especially E & E (electrical and electronic) which consists half of the export products," he said.

Commenting on this, the economist, who requested anonymity, also agreed that those depending on exports will be mildly hurt

"Those who are importing input from overseas, but selling them within the domestic market will benefit the most," he added.

Both economists agreed that the move to de-peg the ringgit was a necessary step since Malaysia needed a liberal financial market.

"Timing was excellent because our reserves are very high and we have lifted the peg at the same time as China made changes to their exchange rate regime."

Ong said it was 'smart' for the government to implement a managed float instead of moving directly to free float.

"If it goes too fast, some might take advantage of the market for profit-making purposes," he added.