The Business Times, Photo Credit to Bloomberg
clock 07-09-2018
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Malaysia Central Bank Holds Rate Amid Subdued Inflation

Malaysia's central bank maintained its benchmark interest rate on the back of low inflation and tempered economic growth expectations for the year. This move was expected by many experts, due to there being little pressure to tighten policy, unlike peers in Indonesia and Philippines.

Bank Negara Malaysia left the overnight policy rate at 3.25 per cent, it said in a statement in Kuala Lumpur on Wednesday, as predicted by all 17 economists in a Bloomberg survey.

"In the immediate term, the economy faces downside risks stemming from heightened trade tensions, prolonged weakness in the mining and agriculture sectors and some domestic policy uncertainty," the central bank said. "On balance, the Malaysian economy is expected to remain on a steady growth path."

In contrast, peers in Indonesia and the Philippines are facing calls for more interest-rate hikes. As inflation in Malaysia remains low, its currency and economy have been fairly sheltered from this situation sweeping across emerging markets.

"The statement is neutral and we expect them to keep rates on hold for the rest of the year," said Jonathan Koh, an economist at Standard Chartered Plc in Singapore. "The focus will be more on growth rather than inflation, and there is increasing risk that the central bank may potentially cut rates."

Economists are keeping a close eye on the steps that Finance Minister Lim Guan Eng plans to take in order to reduce debt and liabilities that exceed RM1 trillion (S$332.7 billion), as well as how the government will be raising enough revenue to control the budget deficit.

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