Malaysia Likely To Cut Rate Once In 2012 - CE

05 Jul 2012

Malaysia's central bank will cut its benchmark interest rate once by 25 bps before year-end to keep growth from stalling, Capital Economics says.  Bank Negara Malaysia kept the overnight policy rate steady at 3.00% for the seventh consecutive meeting Thursday.  There's plenty of room to cut, says Daniel Martin, an economist at Capital Economics, noting that May's inflation of 1.7% is the weakest in a year. While robust domestic demand is helping to offset external weakness, "it would be wrong to assume that Malaysia is immune to recession in the euro-zone," says Martin.  He adds that Malaysia's exports are equivalent to around 100% of GDP, while exports to the euro-zone were equivalent to almost 7% of GDP in 2011, being one of the highest levels of exposure in the region.