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Malaysian central bank holds key rate

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Malaysian central bank holds key rate

Bank Negara Malaysia kept its key interest rate unchanged, in line with expectations, and said it projects inflation to tick up though 2019 amid changes in the consumption tax.

The central bank held the overnight policy rate at 3.25%, as expected by analysts at TD Securities, Capital Economics and Brown Brothers Harriman.

Headline inflation rose to 0.9% in July from 0.8% in June. Policymakers anticipate inflation to edge upward through 2019 after a new sales and services tax took effect in September, but said the impact of the changes will lapse toward 2019-end.

Economic growth moderated to 4.5% in the second quarter from 5.4% in the prior three-month period. The central bank attributed the slowdown to supply disruptions in the mining and agriculture sectors, though it expects the Malaysian economy "to remain on a steady growth path."

The bank also warned that trade tensions continue to pose downside risks, while policy tightening in advanced economies could lead to further capital outflows and financial market adjustments in emerging economies.