BENGALURU- Bank Negara Malaysia (BNM) will hold its key policy rate at 3.00 percent on Thursday, adopting the same no-change stance as most of its Asian peers amidst signs of moderating economic growth and cooling inflation, a Reuters poll of economists showed.
Inflation in the Southeast Asian nation dropped to a two-year low of 2.0 percent in July and the central bank, which does not particularly target inflation in setting monetary policy, said it would cool further.
That suggests BNM, having raised rates by a modest 125 basis points in the current cycle, has concluded its tightening but will keep rates higher for longer as the weak ringgit, down over 5 percent this year, may prevent inflation from falling quickly.
All 27 economists in the Aug. 29-Sept. 4 Reuters poll forecast the central bank would keep its benchmark overnight policy rate unchanged at 3.00 percent at its Sept. 7 meeting while medians showed it there through 2024.
“BNM has limited reasons to change its policy stance for its upcoming meeting … inflationary pressures are easing, keeping the hawkish bias in check. BNM’s focus will remain on financial stability and external risks,” said Lavanya Venkateswaran, senior ASEAN economist at OCBC Bank.
“BNM’s ‘slightly accommodative’ policy stance remains supportive of slowing growth hence there is no imminent need to ease policy. Moreover, BNM’s rate hiking cycle was less aggressive than regional peers implying that the room to par back rate hikes is lower.”
A strong majority, 24 of 25, forecast the central bank to hold rates at 3.00 percent until the end of this year. Only one expected a 25 basis point hike to 3.25 percent in November. -Reuters
