Moody’s: Malaysia to normalise monetary policy, first rate hike this week

Bank Negara Malaysia (BNM) is expected to lift rates by 25 basis points to 3.25 per cent on July 10, 2014. — AFP pic
Bank Negara Malaysia (BNM) is expected to lift rates by 25 basis points to 3.25 per cent on July 10, 2014. — AFP pic

KUALA LUMPUR, July 9 — Malaysia is certain to begin normalising monetary policy soon, and the first rate hike in more than three years may come as early as this week, said Moody’s Analytics.

Its Economist Matthew Circosta said odds have risen that Bank Negara Malaysia (BNM) would lift rates by 25 basis points to 3.25 per cent tomorrow following strong economic growth and steadily rising inflation.

“Financial imbalances are also firmly in the central bank’s sights; rate hikes are needed to avoid asset bubbles after a big build-up in household debt,” he said in a statement today.

Moody’s Analytics is a division of Moody’s Corporation that is engaged in economic research and analysis.

The Malaysian central bank has struck a hawkish tone in recent policy meetings, appearing to build up financial markets and the public for a rate increase.

“It could still take a measured approach; Ramadan celebrations this month could weaken the effectiveness of the bank’s message, leaving September as the next opportunity for a move,” said Circosta.

When BNM does lift the rate, it would signal the start of a new tightening cycle, he added.

“Monetary policy will remain supportive of growth for the rest of 2014, before further tightening pushes rates to a neutral setting in 2015,” said Circosta. — Bernama

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