Malaysia is expected to leave its benchmark interest rate unchanged on Thursday as cooling inflation gives the central bank some breathing room to maintain support for a slowing economy.。

According to a media survey, Malaysia's central bank will keep the overnight policy rate (OPR) at 3% for the second time in a row, the first time in more than a year that it has agreed.。

Remaining unchanged would allow the central bank to continue to assess the impact of a cumulative 125 basis point rate hike since May 2022.。With inflation falling to a two-year low in July, the Bank of Malaysia's more immediate concern is that Malaysia's economic growth outlook faces imminent risks.。

UOB analysts Julia Goh and Locke Loke Siew Ting wrote in a report that increased external uncertainty, continued weakness in the labour market and high base effects "present more challenges for Malaysia to maintain growth momentum in the coming quarters."。This limits the scope for the BoE to tighten monetary policy further, they said, adding that the overnight policy rate is likely to remain at 3% for the rest of 2023.。

The trade-dependent country is already under pressure from weakening global activity。Malaysia's lower-than-expected growth in the April-June period prompted the Bank of Malaysia to predict that the Malaysian economy could expand at the low end of its forecast of a range of 4% to 5% in 2023.。The central bank is counting on consumer demand to drive economic growth for the rest of the year.。

More austerity is unlikely this year for several reasons。First, headline inflation is back to 2%, and core indicators seem set to follow。The ringgit also stabilizes。In short, this will stabilize inflation expectations。Second, growth should slow significantly in the second half of the year 23。The boost to domestic demand from targeted tax cuts is likely to weaken, while weak global demand will weaken exports and weaken business lending.。

July's consumer price index continued its downward trajectory since November, dispelling the Bank of England's previous concerns about "financial imbalances."。According to Bank of Nigeria Governor Abdul Rasheed Ghafour last month, the bank expects price pressures to average 2.8% to 3.8% of the forecast range, the risk is mainly from global development.。

One thing for sure, though, is that Malaysia is facing a new round of price threats.。India's export restrictions have disrupted global markets, causing prices to soar, and the government is planning measures to ensure there is an adequate supply of rice.。Still, CGS-CIMB's Nazmi Idrus and Mas Aida Che Mansor said the impact of higher rice prices on overall CPI growth was "negligible."。They maintain their inflation forecast for 2023 at 2.8%。

Malaysian Prime Minister Anwar Ibrahim will unveil his 2024 spending plan next month, when Malaysia is likely to update its official annual growth and inflation forecasts.。

In any case, the Bank of England has not ruled out the possibility of further interest rate adjustments, with the central bank insisting that monetary policy decisions will still depend on the data.。A research report by Apex Securities shows that policymakers are still likely to raise borrowing costs by another 25 basis points this year, given the outflow pressure on the local currency.。