Malaysia’s central bank, which shortly will have a closely-watched change at the helm,
kept all rates steady at yesterday’s last policy meeting of governor Zeti Akhtar Aziz’s 16-year tenure.
Bank Negara Malaysia (BNM) maintained its key interest rate at 3.25 percent as expected, and kept unchanged a reserve requirement ratio that it cut in January.
“Overall investment will continue to be supported by the implementation of infrastructure development projects and capital spending in the manufacturing and services sectors,” BNM said in a statement.
“The external sector is expected to record a modest improvement and provide additional support to the economy,” the central bank added.
It said Malaysia this year will grow at a “more moderate pace” after last year's 5 percent expansion.
BNM said domestic consumption will continue to prop up the economy, as external risks remain high due to continued uncertainty in commodity prices and rising geopolitical risks.
In January, BNM announced an unexpected move to cut the statutory reserve requirement ratio (SRR) to 3.5 percent from 4.0 percent to boost liquidity.
Brian Tan, Singapore-based analyst at Nomura, said yesterday’s decision “supports the view that while growth is slowing, things are still under control”.
All 11 economists in a Reuters poll had expected BNM would keep the overnight policy rate unchanged.
BNM last revised the rate in July 2014, when it was raised by 25 basis points from 3.0 percent to curb rising household debt.
Concerns about a successor
The widely-respected Zeti, who has helmed the central bank since 2000, will finish her term on April 30. The government has not said who will succeed her.
Analysts have said that at present, succession at BNM is a bigger concern to markets than monetary policy, which they have been very comfortable with.
“Concerns are growing that a political appointee could hurt the BNM’s credibility and independence,” Bank of America Merrill Lynch economist Chua Hak Bin said in a note.
Chua added that deputy governor Muhammad Ibrahim is “widely tipped” to be the person Zeti sees as a capable successor.
Malaysia’s central bank, which shortly will have a closely-watched change at the helm, kept all rates steady at yesterday’s last policy meeting of governor Zeti’s 16-year tenure.
Economists say the credibility Zeti has given BNM has been important at a time Prime Minister Najib Abdul Razak has faced urgings to resign over a financial scandal at state-owned 1MDB and deposits made into his personal bank account.
Last year, the ringgit was Asia’s worst performing currency, losing 18.5 percent against the dollar. This year, the ringgit has strengthened 4.0 percent.
The central bank said inflation is expected to be higher this year compared to 2015. The consumer price index increased 3.5 percent in January year-on-year, the biggest rise since March 2014.
- Reuters
