Malaysia’s central bank kept its benchmark interest rate unchanged on Thursday (May 9), in line with market expectations, against a background of a weakening ringgit currency and steady inflation outlook.
All 30 economists polled by Reuters had expected Bank Negara Malaysia (BNM) to keep its overnight policy rate at 3.00 per cent. A majority think the policy rate will be held steady until at least 2026.
BNM said the latest indicators point towards higher economic activity for the first quarter of 2024, driven by resilient domestic expenditure and a positive turnaround in exports.
“The recovery in exports is expected to gather momentum supported by the global tech upcycle and continued strength in non-electrical and electronics goods,” it said in a statement.
BNM also reiterated the ringgit’s weak performance did not reflect Malaysia’s economic fundamentals and growth prospects.
The ringgit is down over 3 per cent against the US dollar for the year, having fallen to a 26-year low in February.
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The government and central bank have attributed the currency weakness largely to external factors, saying they expect it to strengthen this year.
BNM forecast headline inflation at between 2 per cent to 3.5 per cent this year, compared with 2.5 per cent in 2023, though its outlook will be dependent on expected subsidy and price control adjustments, as well as global commodity and market developments.
The central bank said headline and core inflation averaged 1.7 per cent and 1.8 per cent in the first quarter of 2024 respectively.
“Looking forward, inflation in 2024 is expected to remain moderate, broadly reflecting stable demand conditions and contained cost pressures.” REUTERS
