KUALA LUMPUR, Nov 8 — Malaysia’s central bank held its key interest rate steady at 3.00 per cent yesterday, as expected, but added that it expected inflation to edge higher over coming months.
However, price pressures would be tempered by a host of factors including stable external prices as well as improvements in food production and distribution, Bank Negara Malaysia’s monetary policy committee said in a statement.
Annual inflation accelerated to 2.6 per cent in September, a 20-month high, owing to a rise in petrol prices as the government cut fuel subsidies. Annual inflation rate in August was 1.9 per cent.
But despite rising cost pressures, headline inflation would probably stay below 3.0 per cent through the first half of next year, said Patricia Oh, an economist at Ambank.
Malaysia’s policy rate has been steady since mid-2011, and all 11 economists in a Reuters poll expected the central bank to keep it unchanged. Most analysts expect no change rates until the second half of 2014.
CIMB economist Lee Heng Guie said Bank Negara still saw the need to balance risks pertaining to growth and inflation.
He expected the central bank to keep the base rate unchanged in the first half of next year.
Malaysia’s finance ministry last month forecast a slight pick-up in gross domestic product (GDP) growth to 5.0-5.5 per cent in 2014 from an expected 4.5-5.0 per cent in 2013.
The central bank said Malaysia’s economy would benefit from an “expected improvement in the external sector amid some moderation in domestic demand”.
“Domestic investment activity will however continue, led by private-sector capital spending and the ongoing implementation of infrastructure projects,” it added.
Malaysia will release trade data today, factory output on Monday and third-quarter GDP on next Friday.
Like many of its Southeast Asian neighbours, strong domestic demand has helped offset much of the economic impact from prolonged export weakness. — Reuters
