Malaysia central bank holds key rate anew

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By Danial Azhar

KUALA LUMPUR- Malaysia’s central bank kept its benchmark interest rate unchanged for the 10th consecutive policy meeting on Wednesday, citing strong economic growth and steady inflation, while warning of potential currency volatility.

Bank Negara Malaysia maintained its overnight policy rate at 3.00 percent, where it has been since May 2023. In line with market expectations, the central bank will stand pat on rates until at least the end of 2025.

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The central bank said at the rate’s current level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of inflation and growth prospects.

“Strength in economic activity is expected to be sustained in 2025, driven by resilient domestic expenditure,” the central bank said in a statement.

Steady household spending from a hike in minimum wage and civil servant salaries, robust expansion in investment activity, and an increase in exports will support the economy, the bank added.

“While central banks elsewhere are likely to cut rates steadily over the coming months, we expect BNM to leave rates on hold this year,” wrote Gareth Leather, senior Asia economist at Capital Economics, citing Malaysia’s strong economy as a reason.

However, the bank cautioned that the growth outlook was subject to risks from an economic slowdown for major trading partners as they faced risks from trade and investment restrictions, and lower-than-expected commodity production.

Malaysia’s full-year economic growth is expected to come in at 5.1 percent in 2024, picking up from 3.6 percent growth in 2023 and within the government’s projected range of 4.8 percent to 5.3 percent expansion, according to official advanced estimates.

The economy likely grew 4.8 percent year-on-year in the fourth quarter of 2024, slower than the 5.3 percent in the previous three-month period, the statistics department said in preliminary estimates.

The government and central bank forecast the economy to expand between 4.5 percent and 5.5 percent in 2025.

The central bank said going into 2025, inflation is expected to remain manageable, amid the easing global cost conditions and the absence of excessive domestic demand pressures. — Reuters

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