Bank Negara Malaysia (BNM) is shifting its policy lens beyond traditional monetary tools as the country braces for economic headwinds stemming from sweeping new U.S. tariffs.
Speaking in an interview with Bloomberg TV, central bank governor Abdul Rasheed Ghaffour said Malaysia is entering the trade dispute from a position of relative strength, supported by robust investment activity, resilient domestic demand, and a diversified network of trading partners.
“Monetary policy cannot resolve trade wars. It’s not the best tool to do it,” Rasheed said, noting that while interest rates remain an important lever, broader structural measures will be more effective in shielding the economy from external shocks.
The central bank has held its benchmark interest rate at 3% since May 2023, following a year-long tightening cycle. However, with the U.S. imposing a 24% levy on Malaysian goods, traders are now pricing in a potential 25-basis point rate cut within the next six months, according to Bloomberg’s swaps data.
Rasheed emphasised that BNM’s primary focus remains on maintaining price stability and fostering sustainable growth. “What’s important for us is the mandate that we want — price stability that supports long-term economic growth,” he said.
The ringgit, Asia’s top-performing emerging-market currency in 2024, has come under renewed pressure in April, tracking broader volatility among developing-market peers. Rasheed noted that the central bank is prepared to intervene when necessary to prevent excessive currency fluctuations, but any action will be “judicious” to preserve orderly market conditions.
BNM is currently reviewing Malaysia’s 2025 GDP growth forecast of 4.5% to 5.5% in light of the new tariffs, though Rasheed cautioned against hasty revisions. “We’re not in a rush to change it now because things are still very much fluid,” he said, adding that January’s industrial production data, which came in below expectations, is being closely analysed.
Rasheed also underscored the need for deeper structural reforms. “It’s more important now that the government doubles down on structural changes to strengthen the economy and support the ringgit in a more sustainable way,” he said.
Among the government’s ongoing measures is the planned reduction of fuel subsidies for the top 15% of income earners, with changes to RON95 petrol prices expected later this year. While this move may affect inflation, BNM maintains its consumer price forecast of 2% to 3.5% for 2025 remains intact.
Efforts are also underway to encourage government-linked companies and investment funds to repatriate foreign investment income and convert proceeds into ringgit — a move expected to bolster currency strength. In parallel, BNM continues to engage with exporters and importers to encourage prudent foreign exchange management, including timely conversion of export earnings.
Despite the uncertainty posed by trade tensions, Rasheed’s remarks reflect cautious optimism anchored in Malaysia’s economic fundamentals — and a belief that the path through global volatility lies not in reactionary rate cuts, but in long-term resilience.
