Bank Negara Malaysia (BNM) is projected to maintain its key interest rate at 3.00% through 2025, according to a recent poll of economists. The economy is experiencing strong growth and inflation is well under control, with the current rate sitting at 2.0%. This stability has been reflected in the performance of the Malaysian ringgit, which has shifted from being one of the weakest Asian currencies to one of the strongest in recent weeks.
All 30 economists surveyed anticipate that BNM will hold the overnight policy rate steady on September 5th. Looking ahead, a median from a smaller sample forecasts that rates will remain unchanged until 2026. This stance is notably different from other major central banks, which are expected to lower rates at least once in 2024.
Economists like Lavanya Venkateswaran believe that BNM has no immediate need to adjust the policy rate. Malaysia’s GDP grew by 5.9% in the last quarter, driven by robust household spending, exports, and investment. Inflation is projected to rise in the latter half of 2024 due to uncertainties surrounding a recent policy change to reduce diesel subsidies. As a result, a rate cut is unlikely in the near future.
The Malaysian ringgit has appreciated by 6% this year, partially due to expectations of interest rate cuts by the Federal Reserve. This change in the value of the ringgit suggests that a rate cut by BNM would be premature and could lead to inflationary pressures. The recent weakening of the U.S. dollar has also contributed to the ringgit’s strength, as concerns about U.S. economic growth have grown.
Bank Negara Malaysia is expected to maintain its interest rates for the foreseeable future. With stable economic growth, manageable inflation, and a strong currency, there is no immediate need for a change in monetary policy. As global economic conditions continue to evolve, BNM will monitor key indicators closely to ensure the stability of Malaysia’s economy.
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