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Malaysia: Malaysia keeps benchmark rate on hold as currency faces pressure
KUALA LUMPUR — Malaysia’s central bank kept its benchmark interest rate unchanged for a third straight meeting to help bolster the currency as policymakers in emerging economies gird themselves for tighter US monetary policy.
Bank Negara Malaysia held its key rate at 3 per cent, it said in a statement in Kuala Lumpur on Thursday (Jan 19), as predicted by all 17 economists in a Bloomberg survey.
The ringgit has depreciated about 6 per cent against the dollar since Mr Donald Trump’s surprise win in the US election — the worst hit among Asian emerging markets — prompting Bank Negara to take steps to restrict some offshore foreign-exchange trading to curb the currency’s slide.
The measures have helped provide stability in the ringgit, though “uncertainties in the global economy, the policy environment and geopolitical developments may, however, result in bouts of volatility in the regional financial and foreign exchange markets,” the bank said. “While the risks of destabilizing financial imbalances are contained, the monetary policy committee will monitor these risks to ensure the sustainability of the overall growth prospects,” the bank said.
With more Fed rate increases to come this year, the door for further policy easing in Asia may have closed.
“Given the pressure on our emerging-market currencies, potentially higher US yields pressure on the interest-rate differential between the US and Malaysia, all this would give Bank Negara less room to ease interest rates at this point,” Ms Julia Goh, an economist with United Overseas Bank in Kuala Lumpur, said before the decision. “I don’t see quite a lot of pressure on Bank Negara to cut at this point.”
The economy is projected by the government to grow 4 per cent to 5 per cent in 2017, while inflation is forecast to average between 2 per cent and 3 per cent this year. Consumer prices rose 1.8 per cent in Dec from a year ago.
The central bank said inflation will probably average higher in 2017 than the 2.1 per cent reached last year. The economy remains on track to expand as projected, it said. BLOOMBERG
Source: http://www.todayonline.com/world/asia/malaysia-keeps-benchmark-rate-hold-currency-faces-pressure