Malaysia's GDP growth rate likely to moderate in Q2

Bank Negara Malaysia (BNM) kept the policy rate unchanged at 3.25%. 

According to Barclays, the central bank remains comfortable with its monetary stance, as it remains supportive of growth, even with inflation rising at the margin. 

On recent FX market volatility, BNM noted that financial and FX markets are functioning in an orderly manner, and liquidity in the domestic financial system was ample. This was despite the global and domestic developments, which have pushed MYR above 3.80/USD recently. 

"After a strong Q1, we expect growth to moderate somewhat in Q2, largely reflecting the post GST consumption slowdown. Even then, we remain comfortable with our 4.5% growth projection for 2015, and see growth improving to 5.3% in 2016. Inflation is largely expected to remain manageable, though it should increase in coming months. Nonetheless, we believe that BNM is unlikely to raise rates anytime soon. Hence, we recently pushed back our rate hike call in Q4 15, to Q2 2016, when we expect the economy to have sufficiently recovered its momentum, and inflationary pressures to have turned more demand-led", Barclays.