Malaysia's central bank kept its key interest rate unchanged at 3.50 percent on Friday, as expected, but left the door open for possible future increases, saying vigilance against inflation must continue.
The central bank restated its view that price pressures were expected to ease this year, but added: "Given the uncertainty about the transmission of increases in producer prices to consumer prices, continued vigilance is warranted."
The ringgit currency eased slightly but the yield on the benchmark 10-year government bond was flat after the rate decision. The stock market had finished trading.
"That seems like they're leaving their doors open," said David Cohen, economist with Action Economics in Singapore. "That would be typical of all the central banks around the world right now. There is a lot of uncertainty (over) just how much things will slow down in the second half of the year."
A Reuters poll of economists had indicated just a 20 percent chance that the central bank would lift its overnight policy rate on Friday. Some other Asian central banks have indicated that interest rates may have reached their peaks for now amid signs that economic growth is slowing in the United States, the top export market for many Asian economies.
Malaysian annual inflation, as measured by the consumer price index, has eased after hitting a seven-year high of 4.8 percent in March. It stood at 4.1 percent in July. Malaysia has increased its benchmark rate by a total of 80 basis points since November. The last rise was in April, after which Bank Negara has left rates unchanged amid signs that higher borrowing costs had begun to bite as Malaysians bought fewer cars and businesses applied for fewer loans.
At 3.50 percent, Malaysia's key rate is still among the lowest in Asia and is below inflation. The central bank also said Malaysia would see limited impact from any moderation in global growth in the second half of the year.
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