By Anant Chandak and Madhumita Gokhale
BENGALURU (Reuters) – Malaysia’s central bank will keep its key interest rate unchanged at 2.75% for a third consecutive meeting on Wednesday and for the rest of this year and next as inflation has cooled faster than expected, a Reuters poll of economists found.
After reaching a peak of 4.7% in August, inflation dropped to a nine-month low of 3.4% last month, within the central bank forecast of 2.8%-3.8% for this year. That provides space to assess the impact of four consecutive rate hikes in 2022.
Over 80% of economists, 21 of 25, in the April 24-27 Reuters poll expected Bank Negara Malaysia to keep the overnight policy rate unchanged at 2.75% at its May 3 meeting. The remaining four forecast a 25 basis point rise.
“Malaysia’s moderating inflation path, as seen from the slowdown in both headline and core inflation for March, should be a relief to policymakers, even though inflation remains elevated vs. history,” wrote Chua Han Teng, economist at DBS.Â
“We expect Malaysia’s economic growth to slow in 2023 amid global external headwinds, and therefore, BNM being cognizant of downside risks, would also aim to keep the monetary policy stance supportive of growth.”
Malaysia’s economic growth rate was expected to more than halve to 4.0% this year from 8.7% in 2022 and was projected to recover only marginally to 4.6% next year, according to a separate Reuters poll. That may discourage the central bank from implementing further rate hikes.
While the median forecast showed rates would remain unchanged at 2.75% until at least the end of 2024, a significant minority – 9 of 22 economists – predicted at least one more hike this year.
“Backed by sticky core inflationary pressures, still positive domestic growth momentum and domestic financial stability, we continue to see room for Bank Negara Malaysia to further normalize its monetary policy back to pre-pandemic level,” noted Julia Goh, senior economist at UOB.
(This story has been corrected to remove reference to add target range and details of central bank forecast in paragraph 2)
(Reporting by Anant Chandak and Madhumita Gokhale; Additional reporting by Veronica Khongwir; Polling by Devayani Sathyan; Editing by Ross Finley, Jonathan Cable, Alexandra Hudson)
