BNM to keep benchmark rate unchanged on Thursday
July 8 (Reuters) -Bank Negara Malaysia (BNM) is likely tokeep its benchmark interest rate steady again at its meeting on Thursday due to elevated inflation, weakness in the ringgit and the U.S. Federal Reserve's higher-for-longer stance.
The overnight policy rate has been maintained at 3% for over a year; it was last raised by 25 basis points in May 2023.
Malaysia's inflation rose 2% from a year earlierin May, hitting an eight-month high andsurpassing economists'forecast for a 1.9% rise. Inflation hadremained at 1.8% for three consecutive months fromFebruary. Core inflation rose 1.9% in May,unchanged from the previous month.
Any rate change looksunlikely in the third quarter as the centralbank will need time to monitorthe effect of the government's recent diesel price hike. Malaysia implemented diesel subsidy reforms for selected industries from June 10, floating retail prices of diesel fuel, which increased by about 50% to 3.35 ringgit for commercial and private vehicles.
Moreover, the Malaysian ringgit remains weak versus the U.S. dollar, sheddingsome 2.6% since the beginning of the year, which will further deter BNMfrom cutting rates for now. With the Fedkeeping rates high so far, BNM is likelyto follow suit.
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Catherine Tan is a Reuters market analyst. The views expressed are her own. Editing by Sonali Desai
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