Malaysia’s central bank will leave its key interest rate unchanged at 3 percent on Thursday and keep it there for the rest of the year, marking the end of its modest tightening cycle as inflation has showed signs of cooling, a Reuters poll found.
“The 25 bp surprise hike in May marked the end of the tightening cycle… a slower trajectory of growth and retreating inflation will likely prompt BNM to stand pat for the remainder of 2023,” noted Khoon Goh, head of Asia research at ANZ.
Median forecasts showed rates will remain unchanged at 3 percent until end-2023, with no one predicting a cut this year.This puts BNM in line with its regional peers, who have already ended their tightening cycles. With the U.S. Federal Reserve, the European Central Bank and the Bank of England still intent on raising rates to control inflation, the ringgit has lost nearly 6 percent against the dollar this year, declining more than its Southeast Asia peers.
A weaker currency and resulting higher inflation feeding through expensive imports may restrict BNM from cutting rates any time soon. Gareth Leather, senior Asia economist at Capital Economics, noted that while most central banks in the region were expected to cut rates over the coming year, “the BNM will remain on the sidelines”.Subscribe to our daily newsletter
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