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Free Malaysia Today
10-07-2025
- Business
- Free Malaysia Today
Ringgit, economy face tariff headwinds, say analysts
An analyst said the ringgit is expected to reach RM4.25 per dollar in the third quarter before strengthening to RM4.15 at year end. PETALING JAYA : Tariff concerns will likely weigh on Malaysia's currency and economy in the near term, according to analysts, after the country's central bank cut its benchmark interest rate for the first time in five years. Bank Negara Malaysia (BNM) called its decision a 'pre-emptive measure' in the face of growing risks for the Southeast Asian nation's economy, given slower global trade, weaker sentiment and lower-than-expected commodity production. The policy easing was a closely called outcome, with 13 of 23 economists surveyed by Bloomberg News expecting a rate reduction. The ringgit has risen over 5% versus the dollar this year, joining a rally among most Asian currencies amid the greenback's global retreat. Here is what some strategists and economists are saying about the rate decision: Jeff Ng, head of Asia macro strategy at Sumitomo Mitsui Banking Corp, said the ringgit may face headwinds in the near term. The currency may now be driven by tariff concerns on semiconductors, copper and pharmaceuticals given the Malaysian economy's exposure to these products in trade. Ng said he expects the currency to reach RM4.25 per dollar in the third quarter before strengthening to RM4.15 at year end. The 25% reciprocal tariff rate on Malaysia has likely tilted the balance towards a rate cut today. 'We continue to expect Malaysia's GDP growth to slow to 4.1% in 2025, with some negative effects likely to spill over into 2026,' said Lloyd Chan, FX strategist at MUFG Bank. A key downside risk could stem from Donald Trump's threat to impose a 10% tariff on BRICS nations. 'While Malaysia is not a full member of BRICS, it joined as a partner nation. 'We are not looking for further rate cuts for now, unless growth slows materially below 4% this year, which is currently not our baseline,' Chan said. Today's rate cut is already pre-emptive. A key downside risk to growth could come from sectoral tariffs on semiconductors. 'If this materialises, there could be more rate cuts. 'On the ringgit, we think domestic macro resilience will provide a crucial offset to trade headwinds,' Chan said. This, along with our anticipation for further US dollar weakness, inform our outlook for US dollar/ringgit to fall to RM4.11 by end-2025. Meanwhile, Frances Cheung, head of FX and rates strategy at Oversea-Chinese Banking Corp said the market has not fully priced in another rate cut after this. 'Given the somewhat dovish statement, there appears to be small room for ringgit rates to fall,' Cheung said. 'We expect the Kuala Lumpur Interbank Offered Rate (KLIBOR) to follow the overnight policy rate (OPR) lower, but not fully, resulting in a mild rewidening in KLIBOR-OPR spread,' said Sanjay Mathur, an economist with Australia & New Zealand Banking Group. BNM probably brought forward the anticipated rate cut owing to global economic policy uncertainty which was accentuated by the Trump administration's decision to impose a 25% tariff on Malaysia's exports. Typically, BNM does not do back-to-back cuts unless the economy is in recession.
Bloomberg
10-07-2025
- Business
- Bloomberg
Fed won't cut until December: JPM's Chief US Economist
Bloomberg Markets: The Close "So I believe December is your call for when we are going to get a cut," Michael Feroli of JPMorgan joins Bloomberg "The Close" to discuss. (Source: Bloomberg)
Reuters
09-07-2025
- Business
- Reuters
Malaysia central bank lowers key rate to 2.75% on weaker growth outlook
KUALA LUMPUR, July 9 (Reuters) - Malaysia's central bank cut its benchmark interest rate MYINTR=ECI, opens new tab for the first time in five years on Wednesday, as it looks to support the economy amid a weaker growth outlook and rising uncertainty in global trade. Bank Negara Malaysia lowered its overnight policy rate (OPR) by 25 basis points to 2.75% from 3.00%, where it had been since May 2023, as had been expected by 17 of 31 economists surveyed in a Reuters . The ceiling and floor rates of the OPR corridor are correspondingly reduced to 3% and 2.5% respectively, the central bank said in a statement. The rate decision came a day after U.S. President Donald Trump announced a 25% tariff on Malaysian exports to the United States. BNM said the global growth outlook was weighed down by uncertainties surrounding tariffs, as well as geopolitical tensions, which could lead to greater volatility in global financial markets and commodity prices. While the Malaysian economy was on a strong footing, the central bank said external uncertainties could affect Malaysia's growth prospects. "The reduction in the OPR is... a pre-emptive measure aimed at preserving Malaysia's steady growth path amid moderate inflation prospects," the central bank said. Economists had expected at least one 25-basis-point cut this year, which would hold until the end of 2026, though there was no consensus on where the rate would be then. Estimates for the end of next year ranged from 2.25% to 3.00%. Malaysia has reported a string of soft economic data in recent months with growth slowing to 4.4% in the first quarter, while exports unexpectedly fell in May. Inflation has also remained relatively subdued, with consumer prices rising 1.2% in June, a four-year low. Prime Minister Anwar Ibrahim said in May that Malaysia was unlikely to meet its growth outlook of between 4.5% and 5.5% this year, while BNM has said it would have to lower its growth forecast range due to uncertainties arising from U.S. tariff policies. The central bank also lowered banks' statutory reserve requirement (SRR) ratio by 100 basis points to 1.00% in May - the first SRR reduction since March 2020 at the start of the COVID-19 pandemic - reinforcing a dovish policy outlook. Malaysia's trade ministry said this week it will continue talking to its U.S. counterparts "in good faith" to address outstanding issues, and clarify the scope and impact of the revised U.S. tariffs. Headline and core inflation averaged 1.4% and 1.9% in the first five months of the year respectively, BNM said, adding that consumer prices are expected to remain moderate in 2025. The central bank projects headline inflation to range between 2% to 3.5% in 2025, and core inflation at 1.5% to 2.5%. Both headline and core inflation came in at 1.8% in 2024.
Bloomberg
09-07-2025
- Business
- Bloomberg
Malaysia Cuts Rate for First Time Since 2020 After Tariff Threat
Malaysia lowered its benchmark interest rate for the first time in five years, acting after US President Donald Trump increased a threatened tariff on the Southeast Asian country to 25%. Bank Negara Malaysia cut the overnight policy rate by 25 basis points to 2.75% on Wednesday, the first easing since July 2020. Some 13 of 23 economists surveyed by Bloomberg News expected a cut, a slight increase from Monday, with the rest predicting no change.
CNA
09-07-2025
- Business
- CNA
Malaysia central bank lowers key rate to 2.75% on weaker growth outlook
KUALA LUMPUR : Malaysia's central bank cut its benchmark interest rate MYINTR=ECI for the first time in five years on Wednesday, as it looks to support the economy amid a weaker growth outlook and rising uncertainty in global trade. Bank Negara Malaysia lowered its overnight policy rate (OPR) by 25 basis points to 2.75 per cent from 3.00 per cent, where it had been since May 2023, as had been expected by 17 of 31 economists surveyed in a Reuters poll. The ceiling and floor rates of the OPR corridor are correspondingly reduced to 3 per cent and 2.5 per cent respectively, the central bank said in a statement. The rate decision came a day after U.S. President Donald Trump announced a 25 per cent tariff on Malaysian exports to the United States. BNM said the global growth outlook was weighed down by uncertainties surrounding tariffs, as well as geopolitical tensions, which could lead to greater volatility in global financial markets and commodity prices. While the Malaysian economy was on a strong footing, the central bank said external uncertainties could affect Malaysia's growth prospects. "The reduction in the OPR is... a pre-emptive measure aimed at preserving Malaysia's steady growth path amid moderate inflation prospects," the central bank said. Economists had expected at least one 25-basis-point cut this year, which would hold until the end of 2026, though there was no consensus on where the rate would be then. Estimates for the end of next year ranged from 2.25 per cent to 3.00 per cent. Malaysia has reported a string of soft economic data in recent months with growth slowing to 4.4 per cent in the first quarter, while exports unexpectedly fell in May. Inflation has also remained relatively subdued, with consumer prices rising 1.2 per cent in June, a four-year low. Prime Minister Anwar Ibrahim said in May that Malaysia was unlikely to meet its growth outlook of between 4.5 per cent and 5.5 per cent this year, while BNM has said it would have to lower its growth forecast range due to uncertainties arising from U.S. tariff policies. The central bank also lowered banks' statutory reserve requirement (SRR) ratio by 100 basis points to 1.00 per cent in May - the first SRR reduction since March 2020 at the start of the COVID-19 pandemic - reinforcing a dovish policy outlook. Malaysia's trade ministry said this week it will continue talking to its U.S. counterparts "in good faith" to address outstanding issues, and clarify the scope and impact of the revised U.S. tariffs. Headline and core inflation averaged 1.4 per cent and 1.9 per cent in the first five months of the year respectively, BNM said, adding that consumer prices are expected to remain moderate in 2025. The central bank projects headline inflation to range between 2 per cent to 3.5 per cent in 2025, and core inflation at 1.5 per cent to 2.5 per cent. Both headline and core inflation came in at 1.8 per cent in 2024.
