South Korea, Canada holds rates; Malaysia cuts rates 25bps

invest

July 14, 2016 (LBO) – South Korea and Canada have left base rates steady while Malaysia cut its benchmark overnight policy rate by 25 basis points to 3 percent to support steady growth amid stable inflation.

It is the first change in rates by Malaysia’s Central Bank since it raised its rate in July 2014 and the first rate cut since March 2009.

Malaysia’s Central Bank inflation is projected to be lower at 2 – 3 percent in 2016, compared to an earlier projection of 2.5 – 3.5 percent, and continue to remain stable in 2017.

For Malaysia, domestic demand continues to be the main driver of growth while exports are projected to remain weak following more subdued demand from Malaysia’s key trading partners.

“Global growth prospects have also become more susceptible to increased downside risks in light of possible repercussions from the EU referendum in the United Kingdom,” Malaysia’s Central Bank said.

“Overall, while the domestic economy remains on track to expand in 2016 and 2017, the uncertainties in the global environment could weigh on Malaysia’s growth prospects.”

Meanwhile, the monetary policy board of the Bank of Korea yesterday decided to leave the base rate unchanged at 1.25 percent for the inter-meeting period.

In South Korea, consumer price inflation registered 0.8 percent in June, the same as in May, in line mainly with declines in agricultural product prices.

Core inflation excluding agricultural and petroleum product prices rose slightly to 1.7 percent from 1.6 percent in May.

“The Board will conduct monetary policy to ensure recovery of economic growth continues and inflation approaches the target level over a medium-term horizon, while paying attention to financial stability,” Bank of Korea said.

“The Board will closely monitor the trend of increase in household debt, the effects of the Brexit, monetary policy changes of major countries, and the progress of corporate restructuring.”

The Bank of Canada yesterday announced that it is maintaining its target for the overnight rate at 1/2 percent.

Inflation in Canada is seems on track to return to 2 percent in 2017 as the complex adjustment underway in Canada’s economy proceeds.

“While inflation has recently been a little higher than anticipated, largely due to higher consumer energy prices, it is still in the lower half of the Bank’s inflation-control range,” Bank of Canada said.

“Overall, the risks to the profile for inflation are roughly balanced, although the implications of the Brexit vote are highly uncertain and difficult to forecast.”

The bank said the fundamentals remain in place for a pickup in growth over the projection horizon, although in a climate of heightened uncertainty.

Global GDP growth is projected to be 2.9 percent in 2016, 3.3 percent in 2017, and 3.5 percent in 2018.