MALAYSIA’S central bank will hold its policy interest rate unchanged at 2.75 per cent on Thursday (Mar 9) but lift it next quarter to a cyclical peak of at least 3.00 per cent, according to a Reuters poll of economists.

In a surprise decision in January, Bank Negara Malaysia (BNM) kept its benchmark rate unchanged, citing concerns over downside risks to the economy from 100 basis points of interest rate rises last year aimed at taming inflation, which is still above its target range of 2 per cent to 3 per cent.

Sixteen of 26 economists in the Feb 28 to Mar 6 Reuters poll expected BNM to again keep the overnight policy rate unchanged at 2.75 per cent at its Mar 9 meeting. The other 10 forecast a rise of 25 basis points.

A slight majority, 13 of 22, expected the central bank to raise interest rates to 3.00 per cent or higher by the end of June. By year-end, interest rates would still be 3.00 per cent or higher, according to 15 of 22.

Among respondents who also had more distant forecasts, the median expectation for every quarter of 2024 was 3.00 per cent, implying that the peak would be reached this year.

“Given a moderation in global commodity prices and softer domestic growth momentum amid lingering macro headwinds, we expect BNM to extend its interest rate hike pause at the next monetary policy meeting,” Lee Sue Ann, an economist at UOB, wrote in a research report.

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She expected the central bank to lift its policy rate by 25 basis points in May then keep it unchanged at 3.00 per cent for the rest of the year.

No economist in the poll expected a rate cut this year.

BNM’s policy stance has been in line with that of other Asian central banks, such as the Bank of Thailand and the Reserve Bank of India, which have raised interest rates only modestly in this cycle and are expected to hike once more before pausing.

A weaker currency and the resultant higher inflation feeding through expensive imports is a factor pushing BNM to take its policy rate a bit higher. The Malaysian ringgit has lost more than 3 per cent against the dollar since BNM’s January meeting.

“This, together with an expected rate hike by the US Federal Reserve in its March meeting, supports the case for a rate hike to shore up the currency,” wrote Denise Cheok, an economist at Moody’s Analytics. REUTERS