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BNM: BNM Leaves Rates on Hold as Expected. 

BNM
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  • In signs that the Central Bank could be on hold for 2025, Bank Negara (‘BNM”) held rates at 3.00% where it has been since May 2023.
  • Of the 24 respondents on the BBG survey, none expected a cut in the Overnight Policy Rate.
  • Malaysia’s fourth quarter GDP release came in December and at 4.8% was at the lower end of the expectations for the BNM.
  • The BNM maintains a positive outlook for growth and hinted at expectations for upside potential given an anticipated rise in the ‘tech cycle’ which will support exports, and robust domestic demand (supported by a rise in the minimum wage).
  • The statement cautioned that ‘ this outlook could be affected by the uncertainty surrounding more trade and investment restrictions’ coming from the US. The elevated policy uncertainties could also lead to greater volatility in the global financial markets.’ (per BNM press release).
  • The Malaysian economy has seen inflation moderating to the lower end of their band and anticipates that it will remain manageable in 2025 with a favourable base effect and the reduction in fuel subsidies to wealthy families manageable.
  • The press conference has maintained a consistent message with respect to the currency noting that the performance of the ringgit is primarily driven by external factors and that the narrowing of interest rate differentials between Malaysia and advanced economies is a positive for the currency and that whilst the BNM expects financial market volatility given the global policy uncertainties, ‘Malaysia’s favourable economic prospects and domestic structural reforms, complemented by ongoing initiatives to encourage flows, will continue to provide enduring support to the ringgit. (as per the BNM press release).
  • Of its regional peers, Malaysia has the least amount of rate cuts priced in by their bond market and with some softening of data in early fourth quarter there was potential to see the BNM change their narrative on the economy.
  • However yesterday’s release points to a Central Bank that is very comfortable with their stance and based on the current outlook, appear unlikely to be making changes in the near term. 
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  • In signs that the Central Bank could be on hold for 2025, Bank Negara (‘BNM”) held rates at 3.00% where it has been since May 2023.
  • Of the 24 respondents on the BBG survey, none expected a cut in the Overnight Policy Rate.
  • Malaysia’s fourth quarter GDP release came in December and at 4.8% was at the lower end of the expectations for the BNM.
  • The BNM maintains a positive outlook for growth and hinted at expectations for upside potential given an anticipated rise in the ‘tech cycle’ which will support exports, and robust domestic demand (supported by a rise in the minimum wage).
  • The statement cautioned that ‘ this outlook could be affected by the uncertainty surrounding more trade and investment restrictions’ coming from the US. The elevated policy uncertainties could also lead to greater volatility in the global financial markets.’ (per BNM press release).
  • The Malaysian economy has seen inflation moderating to the lower end of their band and anticipates that it will remain manageable in 2025 with a favourable base effect and the reduction in fuel subsidies to wealthy families manageable.
  • The press conference has maintained a consistent message with respect to the currency noting that the performance of the ringgit is primarily driven by external factors and that the narrowing of interest rate differentials between Malaysia and advanced economies is a positive for the currency and that whilst the BNM expects financial market volatility given the global policy uncertainties, ‘Malaysia’s favourable economic prospects and domestic structural reforms, complemented by ongoing initiatives to encourage flows, will continue to provide enduring support to the ringgit. (as per the BNM press release).
  • Of its regional peers, Malaysia has the least amount of rate cuts priced in by their bond market and with some softening of data in early fourth quarter there was potential to see the BNM change their narrative on the economy.
  • However yesterday’s release points to a Central Bank that is very comfortable with their stance and based on the current outlook, appear unlikely to be making changes in the near term.