Malaysia: Bank negara Malaysia leaves rates unchanged in SeptemberBank Negara Malaysia extends pause in September
At its meeting on 4–5 September, the Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) decided to maintain the Overnight Policy Rate (OPR) at 3.00%, as had been widely expected..
The key domestic factors influencing the Central Bank’s decision on interest rates includedwas subdued inflation, which along with core inflationwith both the headline and core rates averaginged 1.8% in the first half of 2024. Additionally, the BNM expects both headline and core inflation to come inremain within the projected ranges and below 3.0% for the year as a whole. Meanwhile,, and the Malaysian economy’s expansion by 5.1% in the same periodexpanded robustly in H1, and the BNM sees risks to growth as broadly balanced, driven by resilient domestic expenditure, higher export activity, and robust investment activity. The Bank was also upbeat about the ringgit’s trajectory following its recent appreciation. The decision was also influenced by expectations that both headline and core inflation would remain within the projected ranges and are unlikely to exceed 3% for the year as a whole.
The text does not provide specific forward guidance on what the Central Bank will do with interest rates in the futureThe Bank did not provide explicit forward guidance but, only stating stated that the it “remains vigilant to ongoing developments to inform the assessment on the domestic inflation and growth trajectories going into 2025”MPC remains vigilant to ongoing developments to inform their assessment on the domestic inflation and growth trajectories going into 2025, and will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability. By year end, the BNM is unlikely to follow regional peers who have either begun cutting rates or have opened the door for some monetary policy loosening this year. Specifically, oOur panel overwhelmingly expects Malaysia’s interest rates to remain unchanged in in 2024 as a whole, in contrast to regional peers that have either begun cutting rates or have opened the door for some monetary policy loosening..
The BNM’s last meeting this year is scheduled for 5–6 November.
United Overseas Bank analysts Julia Goh and Loke Siew Ting commented on the outlook:
“With a balanced outlook and neutral bias, we maintain our view of a stable OPR at 3.00% for 4Q24 and 2025. We believe that BNM will continue to guard against the second-round effects of robust domestic demand and favorable labor market conditions on inflation over the coming quarters. While more central banks embark on an easing cycle, a stable OPR will provide support for [the ringgit].”