Bank Negara Malaysia (BNM) held benchmark rates unchanged on Thursday as forecast, during indications of easing inflation and moderating growth.

According to economists, rates will likely remain on hold for the remainder of the year.

In 2022, growth in the Malaysian economy reached 8.7%, a 22-year high, however the outlook is dimmed by a global demand slowdown and a weak Ringgit that may lead to capital outflows.

The country’s central bank held its overnight policy rate at 3.00% on Thursday, in line with market forecasts, after a surprise rate hike in May, Reuters reports.

BNM said its “monetary policy stance is slightly accommodative and remains supportive of the economy" at the current interest rate.

“The Monetary Policy Committee will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability,” as per the central bank’s statement.

Both headline and core inflation are forecast to trend lower in the second half of this year, as forecast, the central bank added.

Bank Negara Malaysia expects headline inflation to average between 2.8% to 3.8% this year, compared to 3.3% in 2022. Whilst economic growth is forecast to moderate to 4% to 5% in 2023.

“We don't expect BNM to alter policy for at least the next 12 months,” according to Alex Holmes, senior economist at Oxford Economics.

Economic growth concerns will increase over the next few months, with a weaker Ringgit also dragging on growth.

“We see the biggest risk of more hikes stemming from a weak Ringgit, which should remain under pressure,” Holmes added.

Malaysia’s Ringgit is the worst-performing currency in Southeast Asia this year. The central bank said it would intervene in forex markets to stabilise the currency, which has fallen almost 6% against the US Dollar so far in 2023.