BENGALURU- Malaysia’s central bank will leave its key interest rate unchanged at 3.00 percent on Thursday and keep it there for the rest of the year, marking the end of its modest tightening cycle as inflation has showed signs of cooling, a Reuters poll found.
While headline inflation eased to its lowest in a year in May at 2.8 percent, core inflation – which excludes volatile items – moderated only a bit to 3.5 percent, suggesting the central bank will hold its key rate higher for longer.
All but three of 25 economists polled between June 27 and July 3 forecast Bank Negara Malaysia (BNM) will hold the policy rate steady at 3.00 percent – its pre-COVID pandemic level – at the end of the July 6 meeting, following a surprise hike in May.
Those three expect another 25 basis-point hike to 3.25 percent.
“The 25 bp surprise hike in May marked the end of the tightening cycle… a slower trajectory of growth and retreating inflation will likely prompt BNM to stand pat for the remainder of 2023,” noted Khoon Goh, head of Asia research at ANZ.
Median forecasts showed rates will remain unchanged at 3.00 percent until end-2023, with no one predicting a cut this year.
