Investing.com -- Bank Negara Malaysia (BNM) has once again opted to keep its main policy rate steady at 3.0%. This decision aligns with the anticipations of 30 economists, who predicted no changes to the policy rate. The rate in Malaysia has remained unchanged since its last increase by 25 basis points in May 2023.
Capital Economics, a leading economic research company, suggests that while other central banks may decrease their rates in the upcoming months, the BNM is expected to maintain its current rate throughout the year.
This decision is backed by the strength of the Malaysian economy, which demonstrated a robust growth of 4.8% year-on-year in Q4, according to preliminary figures released last week.
The BNM expressed confidence in the continued strength of the economy in 2025, driven primarily by resilient domestic expenditure. This was stated in their announcement today, indicating a positive outlook for the upcoming year.
However, the future of inflation in Malaysia is less certain. The headline rate was reported at a modest 1.7% year-on-year in December, with figures released today. Yet, inflation is projected to increase later in the year due to the implementation of long-planned subsidy cuts to petrol prices.
These changes, which were announced in the budget, aim to improve public finances. As a result, the headline rate is expected to rise above 3% next year.
Inflation exceeding 3% year-on-year could potentially fall outside of what is considered the central bank's comfort zone, as BNM does not have an explicit inflation target. In its statement today, BNM noted that future inflation will be influenced by the impact of domestic policy measures.
Despite some analysts predicting rate cuts for 2025, the majority, including Capital Economics, foresee no changes to the policy rate this year.
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