Bank Negara Malaysia expected to hold policy rate

KUALA LUMPUR: Bank Negara Malaysia is expected to leave monetary policy unchanged today, as the Brexit vote has not had a significant short-term impact on the country’s economy.
The benchmark rate has been held steady since July 2014, when it was raised by 25 basis points to 3.25%.
All 13 economists in a Reuters poll predicted no change to Bank Negara’s Overnight Policy Rate, though some think the Malaysian central bank could cut in coming months.
Suhaimi Ilias, Maybank Investment Bank group chief economist, said September might bring a cut as, by then, the Brexit impact on global and domestic economies and markets should be clearer.
Julia Goh, Malaysia economist for UOB Bank, said “the odds of a cut in the next six to nine months are higher, but this is very much data dependent. We will see a risk of a cut if growth goes below 4%.”
Malaysia’s economy has seen slowing growth over the past five quarters, but steady exports and resilient private spending leave the central bank “relatively sanguine” about growth prospects, OCBC said in a note.
“Hence, more than having to consider whether there is space to ease or not, the central bank appears to think that there is not much of a need to ease to begin with,” it said.
OCBC added that any shift in policy towards a rate cut would only happen if global growth prospects “darken considerably”, and if exports and domestic consumption take a nosedive.
Goh agrees there is no immediate need for BNM to push for a rate cut, even if it may take on a more dovish outlook. – Reuters