Bank Negara Malaysia keeps interest rate on hold, unlikely to change policy settings in 2017

Malaysian central bank, Bank Negara Malaysia, kept its key interest rate on hold on Thursday. The Overnight Policy Rate was kept unchanged at 3 percent. The central bank, in its policy statement, highlighted on the strength of external demand that is having a positive feedback on domestic labor market conditions and the capex cycle. Moreover, the capex cycle is being further strengthened by on-going infrastructure projects. The central bank expects full year growth to exceed its projection of 4.3 percent to 4.8 percent.

The BNM also noted that the recent moderation in inflation is expected to continue as global cost push factors and global crude oil prices in particular have been weak. However, it does expect core inflation to be sustained at the current rate. The Malaysian economy is indeed experiencing a favourable combination of solid growth and moderating inflation, noted ANZ in a research report.

“The improving growth-inflation mix along with MYR stability and soft US treasury yields suggest that there is little need for BNM to change current policy settings over the course of 2017. The central bank can maintain an accommodative policy with the objective of nurturing growth further”, added ANZ.

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