Bank Negara Malaysia (BNM) will continue gauging the “appropriate degree of monetary policy accommodation to make sure this economic recovery is much more durable”, governor Nor Shamsiah Mohd Yunus said in an interview.
She added “we will continually assess” policy normalisation when asked if it could happen in the second half of the year, as analysts predict, and that BNM will ensure inflation expectations remain anchored.
Many Asian policymakers have steered clear of hawkish pivots, supporting their economies that only recently showed more solid recovery signs.
Yet, Russia’s attack on Ukraine has fanned commodity prices and clouded global trade and investment prospects, complicating exit plans from pandemic-era accommodation.
For its part, the Bangko Sentral ng Pilipinas (BSP) may increase the key rate in the second half, governor Benjamin Diokno said, adding that policymakers “will be patient” amid mounting uncertainty.
The BSP last week signalled that sustaining the recovery “remains a priority” even as it said it’s ready to respond to spillover price effects.
Record-low rates
The statements suggest that BNM and BSP are still unlikely to move in lockstep with the Federal Reserve, which is all but certain to increase rates this week.
Policy rates in Malaysia and the Philippines have been at record lows since July and November 2020 respectively.
In keeping its key rate steady this month, BNM flagged the war in Ukraine as a key risk to global trade and growth.
The war’s effect is pulsing through trade, price, and financial-market channels, Shamsiah said.
While Malaysia stands to benefit from higher commodity prices, the nation may be affected by softer global demand, she said.
“Events continue to unfold. So, at this juncture, it’s still early to definitely size up the total impact of the conflict,” Shamsiah said.
Malaysia and the Philippines are transitioning toward Covid-19’s endemic phase, rolling back mobility curbs to help their economies, which suffered among the worst blows in Asia from the pandemic.
Before the war broke out, Malaysian officials saw economic growth of 5.5%-6.5% this year, while the Philippines forecast expansion by as much as 9%.
Malaysia’s central bank will announce any revisions to its growth forecast on March 30.
Southeast Asia won’t be spared from the war’s fallout, with investments and exports to be impacted by a broader downturn in Europe, according to analysts at Maybank Investment Banking Group.
Economic outlooks for the Philippines, Singapore, Thailand and Vietnam face more downside risks than commodity exporters Malaysia and Indonesia, they wrote in a note last week.
“I think the right thing to do at this time is to be cool and assess the situation,” BSP’s Diokno said.