Bank Negara seen holding key rate as inflation eases
KUALA LUMPUR: Malaysia’s central bank will likely keep its benchmark rate unchanged today, a Reuters poll showed, as inflation is expected to continue to trend downwards and economic growth remains solid.
All 11 economists polled saw no change to Bank Negara Malaysia’s (BNM) key rate, which has been held steady at 3.00% since July 2016.
Analysts say the central bank is likely to hold its overnight policy rate for the rest of 2017, barring a sharp hike in core inflation, which excludes food and fuel costs.
“As long as there is no significant pickup (in core inflation), I think BNM is quite comfortable to leave its key rate for the rest of the year,” said Brian Tan, a Singapore-based economist with Nomura.
The annual headline inflation rate was 3.2% in July, the fourth straight month it slowed after hit- ting an eight-year high of 5.1% in March. Core inflation in July was 2.6%.
The central bank expects fullyear inflation to be in the 3%-4% range. Malaysia’s ringgit currency, which hit a 19-year low of 4.9880 to the dollar on Jan 4, has strengthened about 5.6% against it this year.
Economic growth has risen this year, reaching 5.7% in the first half. In August, the central bank revised up its full-year growth forecast to above 4.8%, from a 4.3%-4.8% range.
ING said yesterday that the acceleration in growth, plus other factors, are reasons for BNM to begin raising interest rates.
But external risks from North Korea’s nuclear threat and various factors suggest the central bank “will not move anytime soon”, ING said, predicting a hike in the third quarter of 2018.