Bank Negara likely to maintain rates as survey shows steady economic growth, low inflation

KUALA LUMPUR, May 7 — Malaysia’s central bank will likely leave interest rates unchanged for a 12th time at its policy meeting this week, all 15 economists said in a Reuters poll, pointing to steady economic growth and low inflation.

Source from (Business Times): http://www.btimes.com.my/Current_News/BTIMES/articles/rup800/Article/
Published: May 08, 2013

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2013/5/8/business/13081335&sec=business
Published: May 08, 2013

Source from (The Malaysian Insider): http://www.themalaysianinsider.com/business/article/bank-negara-likely-to-hold-steady-on-interest-rates/
Published: May 08, 2013



A separate poll ahead of trade and factory output data for March, also out this week, suggested a bottoming out in exports after the Lunar New Year holidays the previous month, adding to the picture of recovery.

A decision to stand pat on interest rates on Thursday would mean the overnight policy rate has been held at 3.00 per cent since May 2011.

Strong domestic demand and government spending in the lead-up to Sunday’s election helped Malaysia’s economy grow at 5.6 per cent in 2012, despite weakness in its export markets.



Low inflation, due to significant price controls and subsidies, has also given Bank Negara room to keep monetary conditions loose. The consumer price index rose 1.6 per cent in March and is expected to accelerate in the fourth quarter but within the central bank’s comfort level.

A strong ringgit caused by inflows to the region has also helped ease Bank Negara’s concerns over price rises. The currency and the stock market have risen significantly after the ruling coalition was returned to power, although with a reduced majority.

Monetary tightening will probably only start at the end of the third quarter, HSBC said in a report.

“Upward normalisation of interest rates will still be necessary later this year, due to rising credit growth and household debt,” the bank said. The poll on trade data showed that exports in March may have declined 2.0 per cent year-on-year, easing from a 7.7 slump in February, which was the biggest drop in over three years.

Imports in March were seen growing at 1.5 per cent after a 4.4 per cent drop in February.

Factory output, or the Industrial Production Index probably rose 0.7 after falling 4.5 per cent in February. — Reuters