[KUALA LUMPUR] Malaysia’s central bank kept its benchmark interest rate unchanged on Thursday (May 8) despite an expected slowdown in economic growth due to a global trade war.
Bank Negara Malaysia maintained its overnight policy rate (OPR) at 3 per cent, where it has been since May 2023, as had been expected by 24 of 30 economists in a Reuters poll.
While the economy had performed well in the first quarter, the balance of risks to the growth outlook was tilted to the downside, the central bank said in a statement
“The tariff measures announced by the US and retaliations have weakened the outlook on global growth and trade,” the central bank said, adding the outlook remained subject to considerable uncertainties, including trade negotiations and geopolitical tensions.
The median forecast in the Reuters poll ahead of Thursday’s decision was for BNM to begin cutting interest rates in the final quarter of this year. Inflation fell to a four-year low of 1.4 per cent in March and advance estimates showed the economy grew 4.4 per cent in the first quarter.
Other Asian central banks, such as Bank Indonesia, the Bank of Korea, the Bank of Thailand and the Philippine central bank, have cut rates more than once to support growth.
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Malaysia’s central bank has said the global trade war means it will have to lower its forecast that economic growth this year would be in a range of 4.5 to 5.5 per cent.
Prime Minister Anwar Ibrahim said this week that the suspension of most of the US tariffs until July meant the economic impact was manageable for now, but Malaysia was unlikely to meet its growth forecast this year.
Malaysia is facing a 24 per cent tariff rate on its exports to the US from July, unless it is able to negotiate a reduction of the levy.
BNM said inflation was expected to remain manageable in 2025, amid moderate global cost conditions and the absence of excessive domestic demand pressures.
The central bank projects headline inflation to range between 2 to 3.5 per cent in 2025, and core inflation at 1.5 to 2.5 per cent. Both headline and core inflation came in at 1.8 per cent in 2024. REUTERS
