Bank Negara Malaysia to keep rate at five-year high to support currency

The Central Bank of Malaysia (Bank Negara Malaysia) is anticipated to keep its benchmark interest rate at a five-year high to support the currency, which recently hit a 26-year low, according to Bloomberg.

All 19 economists surveyed by Bloomberg expect Bank Negara Malaysia to keep the overnight policy rate at 3 per cent, unchanged since May 2023.

The ringgit’s weak performance is attributed to Malaysia’s lower rate compared to other nations. Second Finance Minister Amir Hamzah Azizan cautioned against rate hikes, emphasising the policy rate’s role in price stability and sustainable growth.

Economic challenges, including missed growth estimates and potential inflationary pressures, influence the central bank’s cautious approach.

Key points to watch on Thursday include policymakers’ defence of the ringgit and potential measures to support the currency, as well as BNM’s outlook on growth and inflation.

Despite positive signs such as improved export performance, downside risks persist due to external demand uncertainties, particularly related to China’s economic slowdown.

Inflation remains stable at 1.5 per cent, but concerns arise from the government’s subsidy reform plans and potential global supply chain disruptions. Increased service tax and subsidy rationalisation could contribute to a higher cost of living, impacting inflation.