KUALA LUMPUR, Nov 23 — Malaysia kept its benchmark interest rate unchanged in the face of a weakening currency, signalling policy makers are focused on protecting the ringgit rather than spurring economic growth.
Bank Negara Malaysia held the overnight policy rate at 3 per cent, it said in a statement in Kuala Lumpur today, as predicted by all 19 economists in a Bloomberg survey.
After a surprise rate cut in July that fuelled expectations of more easing, the central bank is shifting its attention to the ringgit following its slump since the November 8 US elections. The central bank is already clamping down on the offshore trading of its currency to help slow the ringgit’s decline.
“We are going to see rates capped at this level for quite a long time,” Krystal Tan, an economist at Capital Economics Ltd. in Singapore, said before the decision. “The central bank would be quite wary of undermining the ringgit as it has been one of the region’s worst-performing currencies.
“The ringgit, along with most emerging market currencies, has experienced sharp adjustments and significant volatility due to continuing uncertainties in global economic and policy environment, and geopolitical developments,” the central bank said in its statement. “Bank Negara Malaysia will continue to provide liquidity to ensure the orderly functioning of the domestic foreign exchange market.”
Once among Southeast Asia’s powerhouses, Malaysia’s economy is forecast to expand at a seven-year low of 4 per cent to 4.5 per cent in 2016. The central bank said inflation will probably be at the lower end of the 2 per cent to 2.5 per cent forecast range for this year and is “expected to remain relatively stable in 2017”. — Bloomberg
