Central Bank of Malaysia anticipated to maintain key rate on 8th May, with rate cuts expected in Q4, according to poll on our site.
New and Improved Article:
Are you ready for the lowdown on the upcoming central bank decision? Malaysia's Bank Negara Malaysia (BNM) is expected to hold its key interest rate steady in the near term, but experts predict a rate cut by the end of 2025 to stimulate a slowing economy.
Here's what you need to know:
In a recent survey, 80% of economists polled projected that BNM will keep the overnight policy rate at 3.00% at its May 8 meeting. But, call it a hunch, six economists foresee a 25-basis-point cut to 2.75%, considering inflation hit a four-year low of 1.4% in March and economic growth slowed to 4.4% in the first quarter.
Jing Yi Tan, market economist at Mizuho Bank Ltd, weighed in, stating external growth headwinds haven’t reached a critical point to warrant preemptive easing by BNM. However, Tan notes that the services and manufacturing sectors remain robust, which hints at stable household spending and a resilient external sector.
Based on median forecasts, rates will remain at 3.0% until the third quarter of 2025, and a 25-basis-point cut is expected in Q4 2025. However, economists are divided on the future path of rates. Some expect the key rate to remain unchanged by the end of Q4 2025, while others predict cuts to 2.75%, 2.50%, and even 2.25%.
While other Asian central banks like Bank Indonesia, the Bank of Korea, the Bank of Thailand, and the Philippine central bank have already reduced rates, there's a lack of consensus among economists about BNM's next move.
Moreover, around half of economists now expect at least one rate cut in 2025, which deviates from the long-held view that rates would stay steady through 2025. Some analysts even anticipate as much as 75 basis points of easing, given rising concerns about US-driven trade tensions and a potential global economic slowdown.
Sunny Kim Nguyen, economist at Moody's Analytics, suggests lowering the overnight policy rate could boost domestic spending and cushion the impact of reduced demand for Malaysian products due to strengthening trade tensions. However, she warns that the easing cycle will be cautious and measured to maintain the bank’s price stability mandate.
Looking back at the economic landscape in 2021, the search results don't contain specific details about BNM's policy direction for that year, focusing instead on the 2025 outlook. However, historical context shows the key rate was historically low (1.75%) to support recovery during pandemic-induced challenges in 2020-2022[^1^].
In conclusion, the available data does not outline 2021 forecasts. For 2025, BNM is expected to hold rates in May but could cut them in Q4 2025, signaling a response to updated growth-inflation dynamics[1][4][5].
[^1^]: For additional context, it's helpful to note that general knowledge outside provided search results indicates Malaysia faced pandemic-driven economic challenges in 2021, necessitating accommodative policies, with the key rate remaining historically low.
- In light of the divided opinion among economists, there might be a need for careful financing to prepare for potential exporting problems that could arise due to the anticipated easing of Malaysia's key interest rate by the end of 2025.
- The expected interest rate cut by the Bank Negara Malaysia (BNM) in 2025 could potentially impact the business sector, as easing could boost domestic spending but may also necessitate a more resilient external sector due to potential reductions in demand for Malaysian products.
- Despite the lack of consensus about the Malaysian central bank's policy direction for 2021, economists anticipate at least one rate cut in 2025, suggesting a possible shift from the previous expectation of steady rates throughout that year.
