BENGALURU, Nov 1 ― Malaysia's central bank will tighten its policy rate by a quarter point for the fourth time in a row on November 3 as upside risks to inflation persist and to support the weakening currency, a Reuters poll showed.

Bank Negara Malaysia (BNM) started raising rates in May even though inflation was within its target range of 2 per cent -3 per cent. It has since hiked rates by 75 basis points to keep inflation in check.

In September, inflation fell marginally to 4.5 per cent from 4.7 per cent in August but robust domestic demand and an accommodative budget pose a risk and economists said all-time high core inflation in September indicated it was sticky.

All but two of 27 economists in the October 25-31 poll predicted BNM would hike its overnight policy rate by 25 basis points to 2.75 per cent from 2.50 per cent at its November 3 meeting.

"The direction of fiscal policy measures in 2023 is still unclear,” noted Sanjay Mathur, chief economist, Southeast Asia and India at ANZ.

"Besides, the odds of the US Fed delivering another 75bp hike in November have also risen. This does not bode well for the Malaysian ringgit, especially when the international reserves are also on a steady path of decline.”

The Malaysian ringgit has fallen around 12 per cent this year.

Two economists ― at Barclays and UOB ― expected BNM to pause at the meeting given a weakening global outlook and to assess the effect of cumulative hikes.

Nearly 90 per cent of economists forecast BNM will raise rates in Q1 of next year, including the two economists calling for a pause in November, giving a median forecast of 3.00 per cent.

While 13 of 18 pencilled in a 25 basis point hike in Q1, three said 50 basis points. Two economists predicted no move.

The median forecast showed the overnight policy rate would remain at 3.00 per cent until at least the end of next year. However, beyond Q1, seven economists expected rates to go up at some point in 2023.

"As core inflation gains momentum, we continue to expect BNM to hike policy rates at consecutive meetings (25bp/meeting pace) through H1 next year, bringing the policy rate up to 3.5 per cent, from 2.5 per cent currently,” analysts at Goldman Sachs said.

"The evolution of subsidy policy after the elections remains a key risk ― a faster shift to targeted fuel subsidies may imply higher inflation pressures, and more hawkish BNM policy outcomes than in our baseline forecasts.”

The Malaysian economy grew by 8.9 per cent in the second quarter, its fastest expansion in a year, mostly driven by domestic demand and resilient exports although the momentum is unlikely to be sustained.

"Economic growth is likely to weaken considerably over the coming quarters as the boost from reopening fades and weaker external demand drags on exports,” Gareth Leather, senior Asia economist from Capital Economics, said. ― Reuters