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Bloomberg
Two Southeast Asian central banks diverged in their policy settings on Thursday, with Malaysia unexpectedly standing pat and Indonesia delivering a widely expected interest-rate increase that brings it closer to the end of its tightening cycle.
Bank Indonesia raised its benchmark rate by 25 basis points to 5.75%, while Bank Negara Malaysia stood pat as predicted by Euben Paracuelles of Nomura Holdings Inc., making him the lone analyst to correctly forecast the decision among 18 economists surveyed by Bloomberg.
Malaysia was the first in Southeast Asia to raise borrowing costs in May 2022 to fight price pressures, while Indonesia was among the last to jump on the tightening bandwagon. Cooling inflation in the US and dimming chances of more aggressive action by the Federal Reserve has taken the pressure off regional currencies, helping policymakers rein in prices and turn their focus on supporting their economies.
Central bankers in both nations signalled their growth priorities and expectations of moderating inflation, amid fears of a recession in some advanced economies.
“Global economic growth this year will be slower than expected, due to the recession risk in the US and Europe, and China’s challenging exit from Covid Zero,†Bank Indonesia Governor Perry Warjiyo said in a briefing, adding that hikes so far are adequate to rein in inflation.
Continued policy tightening by central banks will pose headwinds to the global growth outlook, Malaysia’s central bank said in a statement, adding that pausing now would allow it to assess the impact of its previous rate increases.