Malaysia’s c.bank seen holding rates, eyes 2020 global growth

KUALA LUMPUR: Malaysia’s central bank is expected to keep its benchmark interest rate unchanged at a policy review on Tuesday, according to a Reuters poll, saving its policy ammunition in case global growth falters next year.

Eight out of 11 economists polled forecast Bank Negara Malaysia (BNM) will hold its overnight policy rate steady at 3.00%, after the government announced a marginal expansion in its development budget for 2020.

The three dissenters expect the central bank to cut its key rate by 25 basis points to 2.75%.

Malaysia’s economy is seen accelerating slightly to 4.8% in 2020 from the 4.7% rate forecast this year, the government said, though it will likely lead to a slower pace of fiscal consolidation.

Finance Minister Lim Guan Eng had said the government has set aside funds for stimulus measures should global demand worsen next year.

Malaysia will continue to face risks to growth, especially from the U.S-China trade war, but there is no “screaming call” for a rate cut just yet, said Julia Goh, a Malaysian-based economist with UOB Bank.

Goh also noted recent signs of progress in trade talks between the United States and China.

President Donald Trump said on Thursday that the United States and China will sign a “phase one” trade deal once they decide on a new venue, after Chile cancelled a planned summit set for mid-November.

“So long as we don’t see a marked re-escalation or deterioration in U.S.-China trade tensions, and continue to see stable domestic growth, I think BNM can afford to wait and see,“ Goh said.

BNM lowered its key rate in May, its first cut since July 2016, as a preemptive move to support the economy amid growing concerns over global growth.

Like other countries in the region, Malaysia has not been spared from slowing demand; exports declined 0.2% annually in the first half of this year.

But Malaysia was the only country in Southeast Asia to see growth accelerate from the first quarter. The economy expanded 4.9% in April-June on stronger consumer spending and palm oil production.

“High frequency indicators like retail sales, motor vehicle sales, industrial production all point to growth slowdown in the coming quarters. But the central bank will likely pause now before easing again in 2020,“ HSBC said in a note on Friday. -Reuters

source https://www.thesundaily.my/business/malaysia-s-c-bank-seen-holding-rates-eyes-2020-global-growth-XY1562752