Malaysia's Central Bank Holds Steady on Key Interest Rate Amid Positive Economic Growth

KUALA LUMPUR: In a move anticipated by market analysts, Malaysia's central bank opted to maintain its benchmark interest rate at 3.00% during its final policy meeting of 2024, which took place on November 6. The decision points to a sense of confidence in the nation's economic outlook accompanied by stable inflation rates.

Bank Negara Malaysia (BNM), which has upheld this rate since May 2023, noted that the current economic indicators showcase a robust domestic expenditure and an uptick in export activities, supporting the sustained strength of economic activity.

According to a survey conducted by Reuters, economists predict that BNM will likely keep rates unchanged until at least 2026, reflecting a cautious yet optimistic stance in light of manageable inflation. Year-to-date, headline and core inflation have averaged 1.8%, showing signs of stability.

Looking ahead to 2025, BNM expressed expectations that inflation would remain under control, attributing this outlook to easing global costs and a lack of overwhelming domestic demand pressures. However, the central bank warned that this outlook could be influenced by future government policies.

This year, the Malaysian government has taken significant steps to reform its subsidy framework, slashing blanket subsidies for essential goods like diesel, electricity, and chicken. Notably, there are plans to extend these cuts to commonly used transport fuels by mid-2025.

In a related note, the government's recent budget proposal has raised the forecast for economic growth in 2024, estimating between 4.8% to 5.3%, an increase from the previous range of 4% to 5%. The third quarter of this year has reported an annual growth rate of 5.3%, albeit a decrease from the 5.9% recorded in the second quarter.

This strategic decision by BNM, coupled with the government's proactive economic measures, sets a crucial backdrop for Malaysia as we prepare to enter a new year. As the global economic landscape continues to shift, all eyes will be on how these policies unfold and their impact on the financial stability and growth trajectory of the nation.