KUALA LUMPUR: Malaysia’s new central bank governor presides over her first interest-rate meeting in a better position than most of her peers in Southeast Asia.

Unlike her counterparts in Indonesia and the Philippines — who are ramping up rate hikes to defend their currencies — Datuk Nor Shamsiah Mohd Yunus doesn’t have to do anything for now. Even in Thailand, where rates have been on hold for more than three years and inflation is low, officials are discussing policy normalization following the baht’s slump in the past three months.

In Malaysia, the ringgit has fared better than its peers amid an emerging market sell-off, in part because higher oil prices have bolstered inflows and strengthened the current-account surplus. The scrapping of a consumption tax also means inflation will probably remain low, enabling Shamsiah to dial back some of the hawkishness of her predecessor, who hiked rates in January.

“The hawkish bias in the monetary policy committee is going to definitely come off, which has been there for the last six months,” said Rahul Bajoria, a senior economist at Barclays Plc in Singapore. While the tone may be tempered, that “doesn’t mean that the central bank is going to be ready to cut rates right now,” he said.

Shamsiah took the helm at the central bank earlier this month under the new government of Prime Minister Mahathir Mohamad. She’s no stranger to central bank watchers, having previously been at the institution for three decades, and serving as a deputy to former governor Tan Sri Zeti Akhtar Aziz.

With economic policy still in flux, Shamsiah will be seeking to support growth by keeping rates on hold. The government is reviewing spending projects — including a high-speed rail to Singapore and two energy pipeline developments led by Chinese builders — to help bring down debt from RM1 trillion.

On top of that, a looming trade war between the US and China, Malaysia’s biggest trade partners, threatens the outlook for the export-reliant nation. For now, growth forecasts remain solid at more than 5% for this year.

“The economy is re-balancing, so there could be some slowdown in some sectors, which is inevitable,” said Rosnani Rasul, an economist at Public Bank Bhd

 in Kuala Lumpur. If an interest-rate increase means “you’re going to choke growth, a cut meaning you need to support growth, I’m biased toward a cut, not a raise,” she said.

Shamsiah replaced Tan Sri Muhammad Ibrahim, who quit after questions were raised about the central bank’s role in a land purchase deal linked to the troubled state fund, 1Malaysia Development Bhd.

The ringgit is up 0.7% against the dollar this year, compared with a 6.6% slump in the Philippine peso and a 5.6% decline in the Indonesian rupiah. The Malaysian currency rose for a fifth day by 0.3% to 4.0153 against the dollar as of 4:10 pm on Tuesday in Kuala Lumpur.

With little inflation pressure in the economy, the new central bank chief has scope to keep policy on hold. Australia & New Zealand Banking Group Ltd cut its inflation forecast for Malaysia for this year to 0.7% from 2.7%. Consumer-price growth has been below 2% since February.

“Inflation has turned out to be a lot more benign than what Bank Negara had predicted,” said ANZ economist Sanjay Mathur. “There’s absolutely no need for Bank Negara to do anything through the remainder of the year at least.” – Bloomberg

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