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Malaysia unlikely to follow in Indonesia’s, Philippines’ rate hike footsteps — HSBC

KUALA LUMPUR (May 7): Malaysia’s central bank is unlikely to follow its counterparts in Indonesia and Philippines in raising interest rates when its monetary policy committee meets this week, HSBC said.
The ringgit has been under pressure though a rate hike is not a “panacea”, HSBC said in a note. In fact, recent experience of some Asian central banks suggests that a rate hike would not necessarily turn the tide for the broad US dollar strength, the research house said.
Bank Negara Malaysia (BNM) resisted pressures to raise the overnight policy rate last November, and “we expect the same this week”, HSBC said.
The central bank will announce its monetary policy decision on May 9 after the third of six scheduled reviews for the year. BNM is widely expected to keep the rate unchanged at 3%, according to a survey of 18 economists by Bloomberg.
In April 2024, Bank Indonesia unexpectedly raised its benchmark seven-day reverse repo rate by 25 basis points to 6.25% to support the tumbling rupiah. Bangko Sentral ng Pilipinas raised its key rate by 25 basis points in an off-cycle meeting in October 2023 amid the surging US dollar.
HSBC said that there is little reason to raise or lower interest rates as inflation remains benign amid nascent economic recovery.
BNM is expected to continue sounding “cautiously optimistic” and cite the turn in global trade cycle while keeping its wait-and-see approach on inflation pending better policy clarity, HSBC said.
Overall, BNM is expected to continue to use “the same language” to reflect that it is comfortable with the current policy rate, HSBC added.
Official March data showed milder-than-expected consumer inflation of 1.8% year-on-year due to slower increases in the price of food and healthcare. Government flash estimates, meanwhile, point to the economy expanding 3.9% in the first quarter from a year earlier.
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Source: EdgeProp.my

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