Despite recent hawkish signals from Bank Negara Malaysia, Goldman Sachs indicates the central bank is unlikely to tighten monetary policy at its November meeting, citing uneven economic recovery and subdued inflation. The team of economists led by Chris Boe stated the recent communications primarily aim to preserve policy flexibility rather than foreshadow an imminent rate hike, allowing the central bank to respond should strong economic growth eventually generate broad-based inflationary pressures.

With both headline and core inflation remaining below their long-term averages, Bank Negara Malaysia has room to adopt a wait-and-see approach. Goldman Sachs now expects the benchmark rate to be raised by 25 basis points to 3% at the January meeting, a revision from the firm's earlier forecast of maintaining rates unchanged for an extended period. Although GDP growth has surpassed expectations, the economy is not showing signs of overheating, with the technology sector expanding by 11% while other goods-producing industries grew only 2%.

The pick-up in economic activity has yet to translate into wage and price pressures, while renewed external uncertainties and continued weakness in the non-technology sector support keeping rates on hold for longer. Goldman analysts noted that if the upcoming two sets of consumer price index and producer price index data reveal stronger pass-through of costs to finished goods and household prices, they might move their rate hike forecast forward to November.