Experts Predict BNM Will Pause Rate Hikes Through 2024

According to a Reuters’ poll of economic experts, it seems like Bank Negara Malaysia (BNM) might hold its key interest rate at 3% on Thursday and through 2024. This is despite the fact that the Ringgit is currently weakening amidst stable domestic inflation and a steady growth outlook.

The Malaysian inflation rate has settled at a relatively low 1.9% in September. This is the lowest it has been since March of 2021, and far below the government’s estimate of 2.5% to 3% for this year. As such, BNM has some wriggle room to be accommodative after a modest tightening cycle, Reuters reports.

Ringgit has fallen 8% against US dollar in 2023

Although 125 basis points of rate increases have pushed the key interest rate where it was before the COVID-19 pandemic, the Malaysian ringgit has fallen about 8% against the U.S. dollar this year, more than its Southeast Asia peers.

There are concerns floating around among Malaysia’s peers regarding a more aggressive stance being taken by the US Federal Reserve and a strong dollar. This has led the Bank of Indonesia and the Philippine central bank to raise rates this month. This in turn adds pressure on BNM to follow suit.

Malaysian inflation rate to average 2.5% in 2024

According to Reuters’ poll, all but two of thirty economists surveyed forecast that the central bank would hold its overnight policy rate steady 3. The remaining two expected a 25 basis point increase to 3.25%.

According to a separate Reuters poll, it appears that Malaysia was expected to grow approximately 4% this year and 4.5% in 2024, while inflation rates was expected to stand at around 2.8% on average and 2.5% in 2024.

While the BNM is not forecast to hike again, it seems like economists do not expect a cut any time soon. Among economists who had a long-term view, 23 of 25 expected no change before end-2024.

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