Malaysia: BNM leaves policy rate unchanged in March
The Monetary Policy Committee (MPC) of Bank Negara Malaysia opted to keep the overnight policy rate unchanged at 3.25% at its 5 March meeting. The rate has been kept steady at this level since January last year and the decision in March met market expectations.
The decision was taken in light of stable core inflation, which excludes certain types of fresh food and administered prices of goods and services and which currently highlights “sustained demand conditions”. In year-on-year terms, however, headline consumer prices dropped 0.7% in January, the latest month for which data is available. This drop was mainly linked to a steep drop in global oil prices.
Inflation is expected to remain low in the months ahead “due to policy measures” and the Bank accordingly changed its outlook on inflation. It now expects inflation to be “broadly stable” this year compared to last year; previously the Bank expected inflation to trend higher this year. The main risk to the headline inflation outlook stems from oil price movements. More importantly, the Bank expects core inflation “to be sustained, supported by the steady expansion in economic activity
Looking ahead, the majority of the FocusEconomics Consensus Forecast panel expect the Bank Negara Malaysia to hold the overnight rate steady this year. Two panelists, however, see the Bank cutting its rate this year. Moreover, the Bank seemingly struck a slightly less dovish tone, adding that it recognized “that there are downside risks in the economic and financial environment” and that it would “continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation”.
The next monetary policy meeting is scheduled for 7 May.