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Malaysian central bank likely to stand pat in January, inflation likely to rise from H2 2019

Malaysian growth is likely to decelerate and inflationary pressure is expected to stay benign. Given that Bank Negara Malaysia is expected to stand pat during its meeting tomorrow, according to a DBS Bank in a research report. The central bank had hiked the Overnight Policy Rate to 3.25 percent early last year. However, since then, the economic growth has continuously fallen below expectation.

Drag from investment activity and softness on the export front might continue to be a drag on the economic growth outlook. Moreover, inflationary pressure continues to be benign. The headline number average only 0.4 percent since the zero-rating of the GST in July.

“More importantly, the outlook on growth is biased on the downside while inflation is expected to rise only from 2H19 onwards due to base effect. Barring any surprise in the external environment, there is a lack of fundamental reasons for the central bank to adjust its monetary policy stance in 2019 in our opinion”, added DBS Bank.

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