Thailand
Malaysia: Economists split on whether Bank Negara will cut key rate on May 7
KUALA LUMPUR: Malaysia’s central bank is likely to cut its benchmark rate to 3% at a policy review on Tuesday to cope with a slowdown in growth, a slim majority of analysts in a Reuters poll said.
Seven of 13 economists polled see a 25 basis point rate cut while the other six said Bank Negara Malaysia (BNM) would hold its overnight policy rate unchanged for now.
Malaysia last cut its policy rate in July 2016, to 3.00 percent after Britain voted for Brexit. The rate was raised to 3.25 percent in January 2018 to “normalise” policy.
Malaysia’s economy could use help from a more accommodative monetary policy as it faces persistent risks to trade, along with “anaemic investment spending”, according to ING economist Prakash Sakpal.
“Being ahead of the curve should allow sufficient time for the impact of monetary easing to trickle down to the real economy, thus preparing the economy to ride the slowdown trend. It won’t hurt that there is scope for easing now,” Sakpal said, noting soft inflation.
In March, the central bank cut its economic growth forecast for this year to 4.3-4.8 percent from an initial forecast of 4.9 percent, and projected a significant drop in export expansion due to slowing global growth and the U.S.-China trade war.
Exports shrank a second consecutive month in March, declining 0.5 percent from a year earlier on weak demand for commodities.
In March, the consumer price index rose for the first time this year, gaining 0.2 percent from a year earlier. Analysts expect cost pressures to remain benign for the rest of 2019.
Two weeks ago, Morgan Stanley said Malaysia could see outflows of nearly $8 billion if its bonds are downgraded after a review by global index provider FTSE Russell.
On Friday, OCBC said when BNM makes its decision, low inflation “will have to be balanced against the recent uptick in the USD/MYR and news of the World Global Bond Index review and the omission of Emerging Market government and corporate bonds from the Norges Bank’s Government Pension Fund Global fixed-income benchmark.”
OCBC sees the key rate getting reduced to 3 percent in the third quarter, not now.
A rate cut on Tuesday would be a “tactical and pre-emptive” move to counter rising downside risks to the economy and benign inflationary outlook, Standard Chartered said in a note on Friday. – Reuters
Source: https://www.thestar.com.my/business/business-news/2019/05/03/economists-split-on-whether-bank-negara-will-cut-key-rate-on-may-7/#QYzLSD2wq7lFWekR.99