Malaysia remains on a growth and inflation course: Interest rate unchanged at 3%

The Central Bank of Malaysia, Bank Negara Malaysia (BNM), has maintained the key interest rate at 3%, as expected. This is the result of a recent survey of 22 economists. In a statement, BNM emphasized that the monetary policy stance — last adjusted in May 2023 — continues to support the economy and aligns with the current assessment of the country's economic outlook. BNM continues to observe positive trends. Exports are expected to benefit from a global technology upswing, while tourism revenues are also on the rise, supported by employment and wage growth. The Southeast Asian country's economy exceeded expectations in the first half of the year and may surpass the government's full-year forecast of 4% to 5%. Inflation remains a manageable issue. Although diesel prices have increased, measures have been taken to minimize the impact on businesses. Inflation is expected to remain below 3%, though this is highly dependent on political measures aimed at reducing the fiscal deficit. BNM is acting cautiously and currently sees no reason to prematurely ease monetary policy, especially compared to the Federal Reserve's plans, which have signaled a rate cut. However, if Prime Minister Anwar Ibrahim fulfills his promises and abolishes general subsidies for the most widely used gasoline, prices could rise again — a move intended to strengthen public finances. In the broader region, the Philippines recently lowered rates from a 17-year high, while Indonesia and Thailand have signaled their willingness to loosen monetary policy. BNM emphasizes that Malaysia's positive economic outlook and structural reforms will continue to support the ringgit. The currency has stabilized from a 26-year low against the dollar in February and is one of this year's winners among emerging market currencies.