Headline inflation in Malaysia, which measures the more volatile food and energy prices, hit the highest level, largely driven by the higher average fuel price. Bloomberg figures indicated that September's inflation was in line with expectation. It was higher than Augusts' 3.7% inflation rate. However, despite the increase in headline inflation, the clothing and footwear and communications subgroup indices registered decline. RHB Research expects the headline inflation rate to moderate while the brokerage also indicated that Bank Negara would likely keep the overnight policy rate (OPR) unchanged. However, the OPR could be increased, in line with monetary policy tightening by major global central banks.

(a) Based on the article above, describe the TWO (2) reasons for the rise in headline inflation for September 2017. (4 marks)

(b) Explain the relationship between inflation and the purchasing power of money. (4 marks)