[KUALA LUMPUR] Malaysia’s central bank is looking beyond monetary policy to weather the fallout from US President Donald Trump’s duties, arguing that the country is entering the tariff disputes from a position of strength.
Strong investment activity, resilient domestic demand and diversified trade partners will help provide some support to the economy, Bank Negara Malaysia (BNM) governor Abdul Rasheed Ghaffour said. Policymakers also have numerous policy tools to mitigate the impact of sweeping US levies, he added.
“Monetary policy cannot resolve trade wars. It’s not the best tool to do it,” Abdul Rasheed said on Wednesday (Apr 9). “What’s important for us is what’s the mandate that we want. We want to achieve price stability that provides sustainable economic growth to the country.”
Traders are pricing in a 25 basis point reduction in BNM’s policy rate within the next six months, according to swaps data compiled by Bloomberg, as sweeping US tariffs raise concerns over slower growth. Economists have lowered their growth forecasts for Malaysia this year, which faces a 24 per cent levy.
The central bank has kept the benchmark rate at 3 per cent since May 2023 after a year-long tightening cycle.
Abdul Rasheed said the central bank expects continued ringgit volatility and that it is ready to curb any excessive fluctuation. Any currency intervention is done judiciously to ensure an orderly market, he said.
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Authorities are assessing the impact of the US tariffs and has put this year’s economic growth forecast of 4.5 to 5.5 per cent under review. There are signs that growth may be slowing, with January industrial production coming in below analyst forecasts.
While the central bank is reviewing the growth forecast, “we are not in a rush to change it now because things are still very much fluid”, Abdul Rasheed said.
It’s more important now that the government “doubles down” on structural reforms to further strengthen the economy and provide enduring support for the ringgit, he added.
Malaysia is preparing to raise petrol prices for the country’s wealthiest 15 per cent this year as it seeks to reduce subsidies on its most popular petrol, known as RON95. The central bank has maintained that its impact on inflation will remain contained, and sees consumer prices rising 2 to 3.5 per cent this year.
Efforts to encourage state-linked firms and investment funds to repatriate foreign investment income and convert it into the local currency will continue, he added, which will buoy the ringgit.
The central bank also regularly engages with exporters and importers to encourage them to manage their foreign-exchange activities prudently, including converting their export proceeds into ringgit in a more timely manner.
The ringgit, which was the top performer across emerging markets in 2024, has weakened along with developing economy peers this month. BLOOMBERG
