Malaysia central bank signals scope to adjust rates if inflation rises

Bank Negara Malaysia (BNM) is prepared to respond if inflationary pressures strengthen, governor Abdul Rasheed Ghaffour said on 15 October. He said a change in policy guidance had increased its flexibility as the Middle East conflict continued to keep energy prices high.

Speaking to Bloomberg TV in Bangkok, Rasheed said decisions would depend on incoming data, with the monetary policy committee reviewing conditions at every meeting. He said the current interest rate remained consistent with the inflation outlook and sustainable growth.

BNM left its benchmark rate unchanged at 2.75 per cent in September but removed wording that had characterised its stance as appropriate. Bloomberg data showed swaps traders assigning about a 76 per cent probability to an increase over the following six months on 15 October.

Rasheed expected inflation to stay within the government's 1.5 to 2.5 per cent forecast for 2026, while warning of risks from a lengthy conflict and high energy costs. Consumer prices increased 1.9 per cent year on year in August. The government forecasts inflation of 1.8 to 2.8 per cent in 2027.

On growth, the governor projected economic expansion of around 5 per cent in 2026, supported by Malaysia's varied sources of activity. The government has raised its growth forecast to 4.8 to 5.3 per cent, replacing its earlier 4 to 5 per cent range.

Rasheed acknowledged the risk of an artificial-intelligence slowdown but expected demand for Malaysian electrical and electronics products to remain strong. He said discussions with manufacturers indicated order books now covered 12 to 18 months.