Malaysia's central bank seen cutting key rate by 50 basis pts by year-end

Malaysia's central bank seen cutting key rate by 50 basis pts by year-end - ING
05/06/2007 15:20:00
KUALA LUMPUR (XFN-ASIA) - ING Research chief economist for Asia Tim Condon said
he expects Bank Negara to cut its key rate by 50 basis points by the end of the
year, bringing its policy rate to 3 pct and set the floor for government bond
yields.
He said Malaysian exports are performing dismally and a policy change is only a
matter of time.
"We recently revised our forecast for Bank Negara Malaysia policy rate cuts. We
had forecast the central bank remaining on hold all year but we now expect 50
basis points of rate cuts by the end of the year," it added.
Condon said in a report that Bank Negara has always stated its policy of
managing the ringgit to promote exchange rate stability against the currencies
of its main trading partners.
"Singapore is Malaysia's second largest trading partner after the US so Bank
Negara pays close attention to what the Monetary Authority of Singapore does in
managing the Singapore dollar trade-weighted index," it said.
"We note that since March the Singapore dollar has depreciated slightly against
the US dollar," it said, adding that Bank Negara's policy of "heavy
intervention and grudging accommodation of ringgit appreciation pressure" has
caused the ringgit to appreciate against the Singapore dollar.
ING said it has also cut its 10-year government bond yield forecast to 3.00 pct
from 3.50 pct. The yield is currently at 3.10 pct.


Source: OSK Wirenews