Malaysia sees need for easier monetary policy

MANADO: Malaysia will need to hold off from further rate rises to support an economy that is likely to see slower growth if the United States and European debt crises drag on, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said yesterday.

Given the uncertain conditions, the Malaysian central bank, expected by economists to lift rates at its next meeting in September, should keep monetary policy loose, as the country had little leeway for fiscal stimulus at the moment, Mustapa told Reuters.

“It's important to ensure that we maintain easy monetary policy,” he added. “No hike in interest rates, like America,” Mustapa said in an interview on the sidelines of an Asia-Pacific trade meeting in Indonesia.

Malaysian annual inflation touched a 27-month high at 3.5% in June, reinforcing expectations of a 25-basis point rate rise in September.

Bank Negara surprisingly held interest rates steady at 3% in its last policy meeting on July 7 as it braced for growth to slow, but a downgrade to the US sovereign rating and escalating concerns over European debt have further worried export-dependent South-East Asian countries.

South Korea's central bank left interest rates on hold yesterday, in all likelihood setting a precedent for Asian policymakers forced to respond to the global economic slump. - Reuters