Malaysia holds rate as quick­en­ing growth re­duces stim­u­lus need

The Pak Banker - - FRONT PAGE -

Malaysia held in­ter­est rates un­changed for an 11th straight meet­ing as a strength­en­ing global re­cov­ery re­duced the need for mon­e­tary stim­u­lus.

Bank Ne­gara Malaysia main­tained the bench­mark overnight pol­icy rate at 3 per­cent, the cen­tral bank said in a state­ment to­day. The de­ci­sion was pre­dicted by econ­o­mists. South­east Asian na­tions have shown re­silience to the global slow­down, with Malaysia’s econ­omy ex­pand­ing at the fastest pace in more than two years last quar­ter. While the government has re­frained from cut­ting fuel sub­si­dies ahead of elec­tions, domestic de­mand and wage in­creases are adding to price pres­sures that HSBC Hold­ings Plc and Bar­clays Plc econ­o­mists pre­dict may prompt the cen­tral bank to raise bor­row­ing costs this year.

“Be­nign in­fla­tion and healthy growth make for a sta­ble mon­e­tary pol­icy stance,” Irvin Seah, an econ­o­mist at DBS Group Hold­ings Ltd. in Sin­ga­pore, said be­fore the de­ci­sion. “Though the mar­ket is not ex­pect­ing any rate hike in the near term, risk of a mon­e­tary ac­tion by the cen­tral bank in the sec­ond half of the year is ris­ing if the author­ity hopes to an­chor in­fla­tion ex­pec­ta­tion.”

The ring­git has lost more than 1.5 per­cent this year amid con­cern Prime Min­is­ter Na­jib Razak’s rul­ing coali­tion will lose seats in par­lia­ment. The FTSE Bursa Malaysia KLCI In­dex (FBMKLCI) of stocks has fallen 2.6 per­cent af­ter hit­ting a record on Jan. 7. “In­vestors are pric­ing some de­gree of risk in the cur­rency and eq­uity mar­kets,” said Rahul Ba­jo­ria, a Sin­ga­pore-based econ­o­mist at Bar­clays, who fore­casts a rate in­crease in the fourth quar­ter as in­fla­tion pres­sures rise. “Once the elec­tion un­cer­tainty is out, fun­da­men­tals will push their weight on the mar­ket. We re­main pos­i­tive on the ring­git.”

The ring­git was lit­tle changed at 3.1045 against the U.S. dol­lar to­day. The de­ci­sion was re­leased af­ter mar­kets closed.

Na­jib, whose gov­ern­ing Na­tional Front al­liance won the 2008 vote by its nar­row­est mar­gin in five decades, must dis­solve par­lia­ment by April 28 for polls to be held within 60 days. The pre­mier has boosted spend­ing on roads and rail­ways, raised civil ser­vant salaries and pen­sions, waived school fees and boosted hand­outs for the poor.

Malaysia’s government fore­casts eco­nomic growth of 4.5 per­cent to 5.5 per­cent this year. The ex­pan­sion will be driven by con­sump­tion and in­vest­ment while in­fla­tion will be “well be­low” 3 per­cent this year, Bank Ne­gara Gov­er­nor Zeti Akhtar Aziz said last week. Con­sumer prices rose 1.3 per­cent in Jan­uary from a year ear­lier, af­ter climb­ing 1.2 per­cent the pre­vi­ous month.

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