Malaysia key interest rates to hold, fair but our inflation at 1.4%??

Malaysia’s key rates expected to remain at 3pc
By Rupa Damodaran
Source: Business Times

KUALA LUMPUR: Bank Negara Malaysia is not expected to raise borrowing costs when its monetary policy committee (MPC) meets today.

Economists polled by the Business Times said the Overnight Policy Rate, which is the key benchmark interest rate, will remain at three per cent.

They also expect the rate to remain unchanged at the next MPC meeting in November, which is marked as the last meeting for the year.

Maybank Investment Bank chief economist Suhaimi Ilias says there will be no change until the third quarter of 2013.

Expect a 25 basis-points hike in the fourth quarter of next year, he remarked.

The central bank has maintained the OPR at the same level since May last year.

Citi economist Kit Wei Zheng described Malaysia’s full-year econo-mic growth as being on track to meet the upper end of the four to five per cent target for 2012.

“With greater confidence over growth, disinflation is not sufficient for rate cuts,” he commented.

DBS Bank also expects the OPR to remain at three per cent for the rest of the year.

“Malaysia is in very good shape and there is little basis for any changes in the the monetary policy,” said economist Irvin Seah.

He said Malaysia now has one of the best inflation profiles in East Asia.

“Apart from the subsidy programme, the consistent monetary policy, put forth by the central bank, has played a crucial role in maintaining price stability while lending support to domestic growth.”

Latest July inflation registered just 1.4 per cent year-on-year.

“Although inflation is likely to inch towards the two per cent level by the end of the year, it is still fairly low by historical standards.”

Seah said the risk between growth and inflation is fairly well balanced in Malaysia, placing the central bank in a good position to stand pat and keep rates on hold.

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