Malaysian Central Bank Keeps Policy Rate Unchanged —Update

By Ying Xian Wong

Malaysia's central bank extended its policy-rate pause yet again, declining to join a growing group of peers starting their easing cycles as it keeps an eye on inflation.

Bank Negara Malaysia on Thursday maintained its overnight policy rate at 3.00%, where it has been at since May last year. The decision was expected by seven economists polled by The Wall Street Journal.

"At the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of inflation and growth prospects," Bank Negara Malaysia said.

Economists had almost unanimously expected the decision.

The central bank continued to sound cautiously upbeat about the economic outlook, expecting growth to be supported by exports amid the global tech upcycle, higher tourist spending, a stable jobs markets, as well as robust expansion in investment activity.

On the inflationary front, Bank Negara expects both headline and core inflation to remain in line with expectations, not exceeding 3%. However, the bank stressed that the inflation outlook remains "highly subject to the implementation of further domestic policy measures."

The ringgit's recent recovery is due to expectations of lower interest rates in major economies, especially the U.S., and due to Malaysia's strong economic performance, the bank said. Looking ahead, positive economic prospects, domestic reforms and initiatives to boost inflows are expected to support the currency's strength, it added.

Bank Negara's recent tone leads economists to expect that rates may remain unchanged for the rest of the year.

With the current macroeconomic outlook and neutral policy orientation, the policy rate is likely to stay at 3.00% until end-2025, unless new inflation risks arise, BofA Securities economists Rahul Bajoria and Kai Wei Ang said in a note. They think that any potential rate hikes would depend on emerging inflation concerns over the next four- to eight-quarter horizon, but current growth and inflation rates don't warrant changes to expectations.

RHB also thinks the country's manageable inflation and stable economic outlook suggest little reason for adjusting rates in 2024, economist Chin Yee Sian said in a note. She expects growth to be supported by trade, manufacturing and strong domestic demand, driven by resilient consumer and investment spending.

Write to Ying Xian Wong at yingxian.wong@wsj.com

(END) Dow Jones Newswires

September 05, 2024 05:39 ET (09:39 GMT)

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