Malaysian central bank keeps interest rates unchanged

Currently, the major world economies and especially those that are based on industrial production have shown indications that their economic activity is moderating and Southeast Asia’s third-largest economy, Malaysia is no different.

Malaysia’s central has bank kept the overnight interest rate unchanged 3.5 percent, even though inflation is currently at a 13-month high.

According to Joseph Tan, who is a strategist at Fortis Bank in Singapore, by cutting rates at this time would mean that a spread of inflationary fears will spread across Asia at a time when upwards inflation is more than just a trend.

This is accentuated by the fact that the Malaysian government has been weakened, which will further prevent them from changing interest rates due to their own instability.

Raising interest rates at this time will also prove to be highly unpopular.

The consumer confidence in the region has risen to 2.8 percent from March last year.

On the positive side, Malaysia’s inflation forecast which will see a rise of 0.5 percent to 3 percent, is likely to be a direct result of the impact foreign prices and economic turmoil, which will affect the domestic prices and effectively consumer confidence and spending.

Although, as the country is a net exporter of petroleum, the domestic retail prices of petrol, diesel and natural gas are heavily subsidized, and as a result, are far more stable than most of the worlds major economies.

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