MALAYSIA’S central bank chief has ruled out an interest-rate cut for now, adding to the growing global narrative that borrowing costs are set to remain higher for longer.

The domestic economy is likely to remain resilient as employment and wages support household spending, Bank Negara Malaysia Governor Abdul Rasheed Ghaffour said in an emailed response to questions.

Multi-year infrastructure projects and an expected rebound in global demand in 2024 will also help underpin Malaysia’s expansion, he added.

“The monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects,” said Abdul Rasheed, who led the central bank in keeping the Overnight Policy Rate steady at 3 per cent in his first two meetings as governor. “Cutting the OPR is not on the cards at the moment, no.”

The policy outlook is in line with the global picture where a surprising resilience in economic growth has undercut the case for central banks to start easing.

Swap markets have ruled out an interest-rate cut for the next six months. Malaysian authorities are seeking to keep growth on an even keel while ensuring that rising oil and food costs do not reignite price pressures, which have eased to a two-year low.

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“What we can see now is that although prices are still increasing, it is at a slower pace,” said Abdul Rasheed, whose five-year term as governor began July 1. “This indicates that the past pre-emptive hikes of 125 basis points of the OPR are working into the economy and yielding the intended outcome.”

Malaysia’s government will release the latest growth projections when it presents its 2024 spending plan on Oct 13, said Abdul Rasheed.

The central bank had previously said it sees gross domestic product expanding at the lower end of its forecast range of 4 per cent to 5 per cent growth this year — slowing from an 8.7 per cent pace in 2022 that made it the fastest expansion in South-east Asia.

Prime Minister Anwar Ibrahim’s government is seeking to narrow fiscal deficit to 4.6 per cent of GDP in 2024 by dismantling blanket subsidies in favour of targeted assistance, economy minister Rafizi Ramli said in a separate interview to Bloomberg Television. That’s key for Malaysia to retain one of the region’s highest credit score, and keeping investor faith at a time when higher US rates have worsened the selloff in emerging markets.

The value of the ringgit will continue to be market determined, BNM’s Abdul Rasheed said. The ringgit has fallen almost 7 per cent versus the dollar this year to trail most of its Asian peers. 

“The flexibility of the ringgit is important to help the real economy adapt and withstand external shocks,” according to Abdul Rasheed. “Having said that, we recognize that the recent movements in the ringgit exchange rate could be excessive. More importantly, it is not reflective of Malaysia’s economic fundamentals,” he added, pointing to the country’s economic performance, increase in foreign direct investment flows and inflation levels.

The central bank chief reiterated that BNM’s presence in the foreign exchange market was only to stem currency movements deemed excessive.

The bank’s priority is to implement structural reforms to strengthen growth potential and economic prospects, rather than focusing on a specific ringgit policy, he added. BLOOMBERG