By Devayani Sathyan

BENGALURU – Malaysia’s central banking will delay raising interest rates to offset an uneven economic recovery. According to Reuters, a poll of economists conducted by Reuters found that they expected higher rates for the year-end in a Reuters survey.

Economic growth is still slowing down and inflation remains within Bank Negara Malaysia’s (BNM) forecasts, so the central bank may remain cautious on rates. However, it will avoid any recent hawkishness from some of its global counterparts.

BNM’s one-day repurchase rates would remain at 1.75% from February 14 to 28, according to a Reuters poll. Only four economists expected a rate increase before June.

The 19 economists predicted no change in the rate on Thursday.

Based on the median view of 18 economists, the central bank expected rates to rise to 2.00% during the third quarter. Four expect rates to remain unchanged at 2.25%, while five expect them to rise to 2.25% by September’s end.

The median rate was 2.25%, which is higher than the Jan poll. Rates are expected to increase to 2.25% for the fourth quarter. Sixteen economists forecast rates ending in 2022, while three predicted rates of 2.50%. Seven others projected rates increasing to 2.00%. Only one economist foresaw any rate increases.

Han Teng Chua, economist with DBS Group (OTC) Research wrote: “We expect Bank Negara Malaysia’s patience to keep its overnight policy rate set at a record low in order to support the ongoing economic recovery”

This cautious approach mirrors that of some other Asian central banks, such as the Reserve Bank of India and the Bank of Thailand. They were expected to all maintain an accommodating stance.

Based on lower forecasters’ samples, the BNM will raise rates 25 basis points to 2.500% in July and September next year.

Inflation was 2.3% for headlines in January. Core inflation, however, was 1.6% due to normal economic activity and high input costs.

However, some economists believe that BNM’s patience will not last very long.

Julia Goh, senior economist from UOB wrote: “The building up of domestic inflation pressures along with sustained growth momentum and more aggressive Fed Monetary Policy Tightening would justify an interest rate rise by Bank Negara Malaysia as soon as in 2Q22.”