KUALA LUMPUR (Nov 7): Falling interest rates in advanced economies will be positive for the ringgit at a time when Malaysia keeps its policy rate unchanged while the economic fundamentals remain healthy, said Bank Negara Malaysia (BNM).

The global environment has been fraught with uncertainty, leading to heightened volatility in financial markets, governor Datuk Seri Abdul Rasheed Ghaffour said. “Despite this, the narrowing of interest rate differentials between Malaysia and advanced economies is positive for the ringgit," he said.

Further, “the sound economic fundamentals and highly diversified economic structure have created a highly fertile environment for growth, which will also lend enduring support to the ringgit”, he said.

The central bank maintained the overnight policy rate (OPR) at 3% in the last of six reviews scheduled for this year. The central bank has stood pat on the OPR since it was last raised in May 2023 by 25 basis points, drawing comfort from steady economic growth and tepid inflation.

The US federal funds rate is currently at 4.75% to 5.00%, which may be cut by the US central bank later on Thursday. The European Central Bank last month cut its benchmark rate to 3.25%.

BNM nevertheless will remain cautious, and take a proactive stance in managing potential risks that could impact Malaysia’s financial markets, Abdul Rasheed said.

“We are also closely monitoring global developments and stand ready to manage any spillover to domestic markets, including by ensuring sufficient liquidity in the domestic foreign exchange market,” he added. 

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