BNM Maintains Interest Rate as Ringgit Strengthens, Cautious on Fuel Subsidy Phase-Out Impact

Malasia’s central bank, Bank Negara Malaysia (BNM), kept its benchmark interest rate at 3% during its latest monetary policy meeting, in line with analyst predictions. The decision was attributed to the country’s strong economic performance, low inflation, and a strengthening ringgit, despite Indonesia’s surprise interest rate hike in the previous month. BNM noted that ongoing measures to defend the ringgit and domestic structural reforms would offer further support to the currency over the long term. However, the bank also highlighted the uncertainty surrounding the impact of Malaysia’s planned phasing out of blanket fuel subsidies and replacement with targeted assistance, which could lead to higher prices and contribute to inflation. BNM’s Governor Abdul Rasheed Ghaffour previously stated that the bank would work with the government to increase inflows and allow the ringgit to better reflect economic fundamentals and prospects. This move is aimed at supporting the currency, which has stabilised following a steep decline in February. Analysts predict that Malaysia’s economy will grow by between 4% and 5% in 2024, although inflation is expected to remain moderate, subject to fluctuations in commodity prices and financial markets.