KUALA LUMPUR: Similar to the first one, Bank Negara Malaysia's second monetary policy meeting of 2024 was uneventful as well, HSBC said.
The central bank kept the policy rate unchanged at 3.00 per cent, as expected unanimously by the market, the bank said.
"The tone in the statement remains the same as that in January, with a continued neutral tone on both growth and inflation," HSBC economist for Asean Yun Liu said in a report today.
"Indeed, there are little reasons to sound hawkish, as growth is still at a nascent stage of recovery, and inflation remains largely benign," she added.
Unlike peers such as Singapore and Vietnam, Malaysia has seen a delayed recovery in the trade cycle.
Its gross domestic product growth in the fourth quarter 2023 evidently indicated a major drag from external weakness, Liu said.
"But this appears to see an ultimate turnaround, as January's exports finally turned to a meaningful positive territory after a year of straight y-o-y declines."
Even with a delayed recovery, she said HSBC expects the trade upturn to mainly accelerate Malaysia's growth, likely from 3.7 per cent in 2023 to 4.5 per cent in 2024.
Liu said the cautious optimism on growth prospects have been consistently stressed by Bank Negara.
"Similarly, Bank Negara's tone on inflation also remained the same as the January one. The broad disinflation trend continues, as headline inflation cooled from 2.5 per cent in 2023 to only 1.5 per cent in January.
"That said, as we have been flagging earlier, upside risks remain for 2024, mainly from the policies introduced in the 2024 budget."
Liu said two key developments are a 2.0 percentage point services tax hike to eight per cent and subsidy rationalisation.
The former has started to be effective from March 1, but the implementation timing of the latter remains uncertain.
"While officials earlier signalled this could come in 2Q24, a low take-up rate of only 10 per cent in Padu, a centralised database, ahead of the registration deadline on March 31, raises questions on the roll-out date.
"The clear timing of the targeted subsidies and its scope of coverage will largely determine the inflation trajectory in 2024, a move which will in turn impact Bank Negar's monetary trajectory.
Liu said Bank Negara remains comfortable with its monetary stance, a position that it has maintained since last September.
"We expect a pause from Bank Megara, keeping its policy rate steady at 3.00 per cent in 2024," she added.
