Malaysia’s central bank will probably keep interest rates unchanged for a second consecutive meeting to support its economy as global growth weakens and inflation eases.
Bank Negara Malaysia will leave its benchmark overnight policy rate at 2.75 percent tomorrow, according to all 16 economists surveyed by Bloomberg News. The central bank will release its monetary policy decision at 6 p.m. in Kuala Lumpur after its final rate-setting meeting for 2010.
A delay in adding to Malaysia’s three rate increases since early March would avoid widening a gap with borrowing costs in advanced economies that’s contributed to a 10.7 percent gain in the ringgit this year. Governor Zeti Akhtar Aziz said last week Asian policy makers are willing to act “collectively” on capital flows if needed, amid concern U.S. stimulus will push funds to the region.
The ringgit is this year’s second-best performing currency in Asia excluding Japan, behind the Thai baht. It rose 0.1 percent to 3.087 per dollar at 10:14 a.m. in Kuala Lumpur today. The benchmark stock index closed at a record high yesterday.
Financial Imbalances
Malaysia started raising rates before any other central bank in Asia this year to reduce what it said was the risk of financial imbalances that may be caused by keeping borrowing costs too low for too long. Policy makers increased the key rate by 0.75 percentage point from March to July.
India’s central bank raised borrowing costs for a sixth time this year on Nov. 2 and said the chance of further policy tightening in the “immediate future is relatively low.” The same day, the Reserve Bank of Australia unexpectedly increased its benchmark interest rate for the first time in six months.
Other Asian central banks are maintaining borrowing costs or delaying increases to avoid attracting capital inflows as the region’s growth lures funds at a time when Japan and the U.S. are keeping rates low to boost their economies. Bank Indonesia kept its benchmark interest rate at a record low last week.
The U.S. Federal Reserve last week announced plans to buy $600 billion of long-term government bonds in its second effort at so-called quantitative easing, aiming to stoke economic growth. Policy makers from Asia to South America have said the stimulus could depress the dollar and spark capital flight to emerging markets.
‘Appropriate’ Level
Zeti said in October the current rate level is “appropriate,” suggesting policy makers may wait before taking further action. Malaysia’s inflation rate fell to a three-month low of 1.8 percent in September.
“We don’t see inflationary pressures at this point in time, although we have strong demand,” Zeti said Oct. 26. “Interest rates at this point in time are at appropriate levels.”
Malaysia’s exports rose at the slowest pace in 10 months in September as shipments to the U.S. and China eased. The Southeast Asian economy, whose products include IOI Corp. palm oil and Intel Corp. computer chips, may experience some deceleration in the final quarter of 2010, International Trade & Industry Minister Mustapa Mohamed said last month.
Building Towers
Prime Minister Najib Razak, who expects growth to ease to a range of 5 percent to 6 percent next year from 7 percent in 2010, has unveiled projects including a 100-floor tower and mass rail systems to revive investment and spur economic expansion.
While Bank Negara Malaysia left interest rates unchanged at its September meeting, it is using other tools to prevent asset bubbles from forming.
The central bank this month placed a limit on the loan-to- value ratio for people taking out third mortgages to buy homes in a bid to moderate “excessive” investment and speculation in urban areas. A maximum lending limit of 70 percent took effect on Nov. 3. Banks such as Malayan Banking Bhd., the country’s largest lender, typically provide loans of as much as 90 percent of the value of a property.
(Source: Bloomberg)
No comments:
Post a Comment