Data released today showed that Malaysia’s economy expanded at a slower pace in Q2 than in Q1. The upswing will continue to lose momentum in coming quarters but the risk that the expansion stalls is low. Private sector spending should take over as the support from government expenditure and exports fades. Accordingly, Bank Negara (BNM) will still need to focus on the threat that inflation surprises to the upside and we continue to expect another 25bp policy rate hike in Q4.
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