BENGALURU- Bank Negara Malaysia (BNM) will hold its key interest rate at 3.00 percent on Wednesday and keep it there at least through 2025, as economists expect growth to remain strong and inflation steady, a Reuters poll found.
Inflation slowed to 1.8 percent in September from 1.9 percent in August, staying below BNM’s estimate of 2.0 percent -3.5 percent for the year. However, the government’s decision to roll back a fuel subsidy and raise the minimum wage next year was expected to be inflationary in the near-term.
Though it may edge up in coming quarters, inflation was expected to stay within a 2.1 percent -2.6 percent range, median forecasts of a separate Reuters poll showed.
That along with the Malaysian ringgit’s 5 percent gain for the year against the dollar – the steepest among its peers, suggests BNM will be hesitant to cut rates.
All 30 economists in the Oct. 28-Nov. 1 poll predicted BNM would leave its overnight policy rate at 3.00 percent on Nov. 6.
“Our base case is for Bank Negara Malaysia to keep its policy rate steady at 3.0 percent for a prolonged period. We expect manageable inflation…though acknowledge uncertainty from the potential (fuel) subsidy rationalization,” wrote Yun Liu, ASEAN economist at HSBC.
“As long as inflation falls within BNM’s 2-3.5 percent forecast range we do not expect the central bank to move. That said, the risk of a hike is higher than a cut in Malaysia, compared with regional peers.”
Of the 23 economists who provided a long-term view, all said rates would remain at the current level through 2025. Since BNM’s last hike in May 2023, most economists have predicted it would leave rates unchanged through the forecast horizon.
In contrast, most major Asian central banks were expected to cut rates at least once by the end of 2025.
“While most central banks in the region are eyeing rate cuts, we expect Bank Negara Malaysia to keep its policy rate on hold,” said Denise Cheok, economist at Moody’s Analytics.
“Interest rate hikes in Malaysia were not as aggressive as those elsewhere in the region, and the country’s benchmark is still lower than the early-2019 rate of 3.25 percent.”
