Malaysia central bank holds policy rate as inflation eases

Malaysia central bank holds policy rate as inflation eases

Malaysian ringgit notes are seen among other currency notes. The country's central bank kept its policy rate unchanged on Wednesday. (Reuters photo)
Malaysian ringgit notes are seen among other currency notes. The country's central bank kept its policy rate unchanged on Wednesday. (Reuters photo)

Malaysia’s central bank kept its benchmark interest rate unchanged as expected, after inflation eased and an early rate hike this year helped to bolster the currency.

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

As one of the first central banks in Asia to raise interest rates this year in January, Bank Negara is facing little pressure to tighten now, with most economists predicting no change for the rest of the year.

Inflation is at its lowest level since 2016 while the currency’s 14% gain against the dollar in the past 12 months is the best in Asia.

“Inflation is projected to average lower in 2018, on expectations of a smaller effect from global cost factors,” the central bank said in its statement. “A stronger ringgit exchange rate compared to 2017 will mitigate import costs.”

Bank Negara has said the early move was a preemptive one to ensure the policy stance is appropriate and to prevent a build-up of risks that could arise from interest rates being too low for too long. Governor Muhammad Ibrahim has called it a normalisation of policy, rather than a tightening trend.

Malaysia is gearing up for an election that must be held by August, with expectation that it may happen sooner as the police froze overseas travel for its personnel through May, the Star newspaper reported.


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