The deputy governor of Bank Negara Malaysia said that Malaysia will not use monetary policy as a tool to support the domestic currency.
Bank Negara Malaysia’s Adnan Zalani Mohamed Zahid said the country’s policy decisions will depend on economic growth and inflation prospects.
“We’re not going to use interest rates as a tool to sort of defend the ringgit,” he told CNBC’s “Squawk Box Asia” program, although interest rate differentials have been “a key driver of much of the performance we’ve seen so far.”
this Ringgit Bank Negara said in a statement that the current situation does not reflect Malaysia’s economic fundamentals and growth prospects. statement last week.
“External factors, namely expected shifts in the path of monetary policy in major economies and ongoing geopolitical tensions, have led to heightened capital flows and exchange rate volatility across the region, including the ringgit,” it added.
As with Malaysia, other Asian currencies such as yen and won It has also been hit hard recently by the continued strength of the U.S. dollar.
This is exacerbated by the fact that the Fed is likely to keep interest rates higher for longer as inflation remains sticky.
Adnan Zaylani said the central bank expects the U.S. interest rate cycle to shift “at some point” and this will be reflected in “the ringgit’s performance”.
The ringgit last traded at 4.726 against the US dollar on Tuesday.
stabilization measures
The deputy governor told CNBC that the National Bank has taken a series of measures to maintain currency stability.
“We continue to conduct market operations, which is providing dollars and liquidity to the market when needed,” he said.
Adnan Zaylani said the central bank has also been working with government-linked companies to convert “their overseas earnings into the ringgit”, which has helped stabilize the ringgit.
“We are also studying how to further attract capital inflows from companies with large foreign currency balances overseas,” he added.
Bank Negara Malaysia keeps benchmark interest rate unchanged Last week it was 3%choosing not to follow recent interest rate hikes in other Southeast Asian countries like indonesia.
Adnan Zaylani said that at current levels, the National Bank’s monetary policy stance is not “tightening” and remains supportive of the economy.
He added that Malaysia’s economic growth remains “pretty favourable” but “we do see the potential for higher inflation this year”.
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