WHILE Hong Kong grapples with double-digit inflation, Malaysia is cutting its forecast of 4.7 per cent price increases to just four per cent this year. The country's inflation rate rose to 4.7 per cent last year, from 4.4 per cent the year before, on the back of six years of heady economic growth. Over the long-term, inflation in the country is expected to remain between three and four per cent. To show that the government is serious about keeping prices under control, a committee headed by Prime Minister Dr Mahathir Mohamed was set up in May to combat inflation. Although inflation is not high by international standards, the government is worried that infrastructure bottlenecks, a labour shortage and capital inflows attracted by Malaysia's high interest rates will cause inflationary pressure. Food price controls have already been implemented and the measures are expected to be maintained. According to MeesPierson Securities (Asia) in a report this month, reduction of import duties on 600 essential items earlier this year, will further ease inflationary pressure. MeesPierson says that the expected further improvement in inflation ''will give the central bank room to ease its monetary stance in an atmosphere of ample liquidity''. The report says interest rates have been declining since the beginning of the year and are expected to fall through to the end of the year. The brokerage firm added that imported inflation should not be a cause of concern as imports are not expected to increase significantly and the ringgit is expected to remain strong over the next six to nine months.