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Photographer: Nadirah Zakariya/Bloomberg Photographer: Nadirah Zakariya/Bloomberg

Malaysia’s central bank is expected to keep interest rates unchanged Tuesday, with a few economists predicting more easing in coming months amid an uncertain global economy.

Of the 25 economists surveyed by Bloomberg, 16 are forecasting the benchmark rate to stay at 3% as the policy committee meets for the last time this year. Nine analysts project a 25 basis-point cut.

Bank Negara Malaysia was among the first central banks in Asia to ease borrowing costs this year, faced at that time with renewed escalation in trade tensions. It has since held pat after cutting rates by 25 basis points in May, while central banks across Asia from India to the Philippines have followed with a string of rate cuts to shore up their economies.

Analysts at Malayan Banking Bhd see Bank Negara on hold for the rest of 2019, given the government’s optimistic growth forecasts, an expansionary budget for 2020 and a deescalation in the trade war. Others, like Ahmad Nazmi Idrus at RHB Research Institute, see a rate cut in the first quarter of 2020 once FTSE Russell completes a review to determine whether Malaysian bonds should remain in its global index.

Here’s what to watch out for in the policy statement:

Faster Growth

Uneven Growth Malaysia's economy expands on solid domestic demand Bank Negara Malaysia

Malaysia adjusted its growth forecast to 4.7% in 2019, from an earlier projection of 4.3% to 4.8%, after the economy bucked regional trends with a faster-than-expected expansion in the second quarter. The government’s even more optimistic about 2020, forecasting growth at 4.8%, supported by a boost in state spending, cash handouts and investment incentives.

What Bloomberg’s Economists Say “We agree that Malaysia’s expansion may experience less damage to growth than regional peers. Even so, we see significant downside risks to these forecasts, given the escalation in U.S. tariffs since May and much weaker prospects for global demand.” Tamara Henderson, Asean economist

Weak Exports

Exports shrank in September by the most in three years as shipments of electronics and palm oil fell. That raised the odds of a rate cut, according to ING Groep NV’s Prakash Sakpal, who expects a 25 basis-point reduction on Tuesday.

“The electronic export vigor observed earlier in the year has ended,” he said in a note. “And with continued external headwinds, the downside growth risks are rising.”

The impact of higher tariffs has weighed on the global economy despite positive signs from the U.S.-China trade talks. Malaysia’s own growth drivers, manufacturing and exports, will remain weak for at least another six to 12 months, analysts at Kenanga Research wrote in a note.

Low Inflation

Inflation has been muted. Consumer-price gains averaged 0.6% for the first nine months of the year, short of the country’s estimate for 0.9% for 2019 and 2% in 2020.

Falling transport costs helped by subsidized fuel costs have kept price pressures low, while the government seeks better ways to measure the cost of living in the country to bolster purchasing power.

“Moving forward, as we expect core inflation rate and other major macroeconomic indicators to remain stable, we opine no further change in monetary stance by BNM at this juncture,” analysts at MIDF Research wrote in a report.

— With assistance by Tomoko Sato