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Malaysia Monetary Policy January 2024

Malaysia: Bank Negara Malaysia holds again in January

At its 23–24 January meeting, the Monetary Policy Committee of Bank Negara Malaysia (BNM) left the overnight policy rate (OPR) unchanged at 3.00%, following its hold in November. The decision met market expectations.

The BNM deemed that within-target inflation and a resilient economy, supported by robust domestic demand and a strong labor market, justified the hold. In addition, the Bank expects inflation to remain muted and growth to improve from 2023’s projection in 2024 as exports recover and domestic spending remains upbeat. Meanwhile, the BNM noted that recent depreciatory pressures on the ringgit had stemmed from exogenous factors, which did not warrant changes to the policy rate.

The BNM did not provide explicit forward guidance but reiterated that it would “ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability”. Our panel expects the Bank to maintain the OPR at current levels in 2024. However, potential changes to price controls and subsidies this year could reignite price pressures, posing an upside risk to the OPR.

The next monetary policy meeting is scheduled for 6–7 March.

UOB analysts Julia Goh and Loke Siew Ting expect no changes to the OPR in 2024:

“The latest neutral [monetary policy statement] and macro landscape reinforce our view of a prolonged interest rate pause by BNM at 3.00% throughout the year. Our OPR call is also backed by in-house assumptions of a soft landing in the global economy, Fed rate cuts starting mid-2024 and gradual subsidy rationalization by the Unity government. Moreover, the continuation of steady OPR will help to narrow the negative gap with US interest rates and support the [ringgit] recovery by year-end.”

Goldman Sachs analysts also forecast an extended pause this year:

“Going forward, we continue to expect BNM to keep the OPR rate unchanged at 3.0% through end-2024. A more aggressive subsidy rationalization than we currently expect is an upside risk to our headline inflation and BNM policy rate forecasts in 2024.”

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