Malaysia’s policy rate likely to be cut this year

Bank Negara Malaysia (BNM) kept its overnight rate at 3.0% today, as was widely anticipated. Looking ahead, we think that Malaysia’s exports will struggle and that inflation is likely to fall further. Risks to domestic demand are also skewed to the downside. Accordingly, we continue to expect BNM to loosen policy this year and have pencilled in 50bp of rate cuts by end-2012.

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