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Malaysia: Finding the right policy mix to balance inflation and growth

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Published Fri, Nov 10, 2023 · 05:00 AM
    • Malaysia has been hit hard by high global commodity and food prices, like its neighbouring economies. At the same time, the ringgit has been kept broadly at par with other regional currencies despite relatively low interest rates.
    • Malaysia has been hit hard by high global commodity and food prices, like its neighbouring economies. At the same time, the ringgit has been kept broadly at par with other regional currencies despite relatively low interest rates. PHOTO: REUTERS

    THE post-pandemic era has been very challenging for central bankers worldwide. With the return of high inflation in 2022 after two decades of calm and serenity, “higher for longer” has become a new theme as the US Federal Reserve vowed to fight inflation. This has sent the US dollar soaring and emerging-market (EM) currencies plunging.

    Asian EMs, which were just coming out of a pandemic downturn, were caught between a rock and a hard place: tightening policy to contain inflation which could derail the nascent economic recovery, or maintaining an accommodative policy to support growth which could lead to accelerating inflation.

    In addition, the region was faced with downside risks to growth from a potential downturn in the United States and Europe, as the Fed and the European Central Bank jacked up their policy rates to anchor inflation.

    Malaysia economyAsean BusinessAsean

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