Malaysia Keeps Key Interest Rate Unchanged As Expected

(RTTNews) - Malaysia's central bank left its benchmark interest rate unchanged again on Thursday and forecast acceleration in inflation in the second half of the year after the unwinding of fuel subsidies.

The Monetary Policy Committee of Bank Negara Malaysia headed by Datuk Abdul Rasheed Ghaffour decided to maintain the Overnight Policy Rate at 3.00 percent.

Previously, the bank had changed the rate in May 2023, when it was raised by 25 basis points.

The central bank remained upbeat about the economic outlook. The MPC today said the latest indicators point towards sustained strength in economic activity in the second quarter of the year, driven by strong domestic expenditure and better export performance.

Inflation is forecast to move higher in the second half of the year after diesel subsidy cuts. For the whole of 2024, headline and core inflation are forecast to average within the projected ranges of 2.0 percent to 3.5 percent, and 2.0 percent to 3.0 percent, respectively.

"Going forward, the upside risk to inflation would be dependent on the extent of spillover effects of further domestic policy measures on subsidies and price controls to broader price trends, as well as global commodity prices and financial market developments," the bank said.

At the current interest rate level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of inflation and growth prospects, the bank said.

The MPC reiterated that it will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability.

Unlike much of the rest of the region, rate cuts are unlikely in Malaysia this year, economists at Capital Economics, said.