Malaysia leaves in­trest rate un­changed

The Pak Banker - - COMPANIES/BOSS -

Malaysia left in­ter­est rates un­changed as ac­cel­er­at­ing in­fla­tion re­duced scope for a cut in bor­row­ing costs at Gov­er­nor Zeti Akhtar Aziz's last sched­uled pol­icy-set­ting meet­ing.

Bank Ne­gara Malaysia kept the overnight pol­icy rate at 3.25 per­cent for a 10th meet­ing, it said in a state­ment in Kuala Lumpur Wed­nes­day. The de­ci­sion was pre­dicted by all 20 econ­o­mists sur­veyed by Bloomberg News. The cen­tral bank also kept the statu­tory re­serve ra­tio steady af­ter a 50-ba­sis-point cut at the Jan­uary meet­ing.

Malaysia's growth is slow­ing as ris­ing costs eat into dis­pos­able in­comes and erode con­sumer con­fi­dence, and com­pa­nies hold back on in­vest­ments. In­fla­tion in Jan­uary ac­cel­er­ated to the fastest pace since 2014, while a slump in crude has curbed govern­ment rev­enues and prompted Prime Min­is­ter Na­jib Razak to trim the growth fore­cast for 2016.

"It's not a sur­pris­ing stance given that in­fla­tion has stayed above the pol­icy rate," Wel­lian Wi­ranto, an econ­o­mist in Sin­ga­pore at OverseaChi­nese Bank­ing Corp., said be­fore the de­ci­sion. "It will still take a while be­fore in­fla­tion starts to turn south, and giv­ing them the space to cut rates that way."

The ring­git fell 0.3 per­cent to 4.1302 a dol­lar in Kuala Lumpur Wed­nes­day. The Malaysian cur­rency has strength­ened about 4 per­cent against the green­back this year, re­bound­ing from a 19 per­cent de­cline in 2015.

In­fla­tion will av­er­age be­tween 2.5 per­cent and 3.5 per­cent in 2016, Zeti said in Jan­uary, af­ter price gains of 2.1 per­cent last year. Gross do­mes­tic prod­uct is now pro­jected by the govern­ment to ex­pand as much as 4.5 per­cent this year, af­ter grow­ing 5 per­cent in 2015.

Zeti is one of Asia's long­est-serv­ing cen­tral bank heads, hav­ing taken of­fice in 2000, two years af­ter her stint as act­ing gov­er­nor in 1998 amid a then-con­tro­ver­sial move to peg the ring­git to deal with cap­i­tal out­flows. Na­jib has given no in­di­ca­tion who he will pick to re­place Zeti when her term ends in April.

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