By Rahul Trivedi
BENGALURU (Reuters) – Malaysia’s central bank will hold its key interest rate steady on Thursday but is expected to lower it by 25 basis points in the last three months of the year to support slowing economic growth amid growing trade tensions, a Reuters poll suggested.
With inflation hitting a four-year low of 1.4% in March and economic growth moderating to 4.4% in the first quarter, economists now expect Bank Negara Malaysia to cut rates this year rather than keep them steady through 2025, as previously anticipated.
The latest Reuters poll taken from April 29-May 5 showed 80% of economists, 24 of 30, expected BNM to keep its overnight policy rate unchanged at 3.00% on May 8, where it has remained since May 2023. The remaining six forecast a 25-basis-point cut to 2.75%.
“While external growth headwinds have certainly grown, it has not reached a point to trigger a preemptive easing by BNM,” Jing Yi Tan, market economist at Mizuho Bank Ltd, said.
“While Q1 GDP printed below expectations, services and manufacturing growth remain supported, which could suggest household spending and the external sector are still holding up,” she added.
Median forecasts showed rates will remain at 3.0% until the third quarter of 2025, followed by a 25-basis-point cut to 2.75% in Q4 2025, but economists are divided on the future path of rates.
Eleven economists forecast the key rate would still be at 3.00% by the end of Q4, while eight predicted a cut to 2.75%, one to 2.50% and three to 2.25%.
That stands in contrast with other Asian central banks, such as Bank Indonesia, the Bank of Korea, the Bank of Thailand and the Philippine central bank, which have cut rates more than once to support growth.
Despite this lack of consensus, just over half of economists, 12 of 23, now predict at least one rate cut this year, marking a departure from the long-held view that rates would stay at 3.00% through 2025.
Some economists are even pricing in as much as 75 basis points of easing, as expectations of moderating growth in Malaysia rise amid U.S.-driven trade tensions and concerns about a global economic growth slowdown.
“Global economic growth will likely slow due to higher U.S. tariffs. As an exporting nation, Malaysia will see reduced demand for its products. Lowering the overnight policy rate could help bolster domestic spending and mitigate the fallout,” Sunny Kim Nguyen, economist at Moody’s Analytics, said.
“However, the easing cycle will be incremental and measured as the price stability mandate remains key to supporting sustainable economic growth,” she added.
(Reporting by Rahul Trivedi; Polling by Veronica Khongwir and Susobhan Sarkar; Editing by Andrew Heavens)
