Malaysia seen keeping policy rate unchanged as ringgit stays

[KUALA LUMPUR] Bank Negara Malaysia (BNM) is expected to keep its policy rate unchanged at 3.25 per cent at a meeting on Thursday, despite inflation falling to its lowest since 2009, a Reuters poll showed.

All 16 economists were unanimous in expecting the central bank to keep the benchmark policy rate unchanged due to capital outflow and economic risks.

Malaysia's currency, the ringgit, has fallen by more than 3 per cent so far this year, making it the second worst performing currency in emerging Asia.

The ringgit has weakened against the US dollar since September 2014, causing the country's reserves to fall. Compounded by sliding oil prices, Malaysia's reserves have gone down by almost US$21 billion in the past five months.

Although Bank Negara is expected to stand pat on interest rates in March, Bank of America Merrill Lynch said in a note that the "odds of BNM easing policy has risen, given downside risks to growth and a sharp fall in inflation".

The annual rate of inflation was at 1.0 per cent in January, reflecting a drop in global oil prices.

REUTERS