The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
The rally in Malaysia’s ringgit, which reached a three-year high this week, is expected to persist due to the nation’s favorable economic conditions and ongoing reforms, according to Bank Negara Malaysia (BNM).
“Malaysia’s positive economic prospects and structural reforms, supported by initiatives to encourage capital flows, will continue to provide enduring support for the ringgit,” BNM said in an emailed response to Bloomberg News on Wednesday.
Despite the 14% surge in the ringgit this quarter, making it the top performer among emerging markets, BNM officials are not overly concerned. The currency's strength has been buoyed by a rebound in exports and foreign inflows of about US$3.6 billion into Malaysian bonds and equities this quarter.
The ringgit slipped slightly by 0.3% to 4.1427 per dollar on Thursday, after reaching a high of 4.1080 per dollar earlier in the week, its strongest level since June 2021.
Potential for a Pause in Gains
Following the ringgit’s sharp gains, the currency may take a pause, noted Lloyd Chan, a currency strategist at MUFG Bank Ltd. The appreciation of the ringgit was also attributed to “greater clarity on the interest-rate path of developed countries, particularly the US Federal Reserve,” according to BNM Deputy Governor Adnan Zaylani Mohamad Zahid.
Zaylani highlighted that the narrowing of interest-rate differentials between Malaysia and the US could continue to attract portfolio inflows, enhancing investor interest in the country.
BNM kept interest rates unchanged in its September meeting, and the deputy governor indicated that the benchmark rate is expected to remain stable throughout the year.
Government Reforms to Bolster Confidence
Prime Minister Datuk Seri Anwar Ibrahim's government has implemented reforms aimed at strengthening investor confidence by broadening the country’s revenue base and reducing subsidies. One such move was the removal of diesel price controls in June, which is part of the broader effort to improve Malaysia’s financial health.
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