By A. Ananthalakshmi and Rozanna Latiff

KUALA LUMPUR (Reuters) -Malaysia’s central bank kept benchmark interest rates unchanged on Thursday, as expected, amid signs of moderating growth and easing inflation, with economists saying it will likely stay on hold for the rest of the year.

Growth in the Southeast Asian economy hit a 22-year high of 8.7% last year, but the outlook is clouded by slowing global demand and a weak ringgit currency that could spark capital outflows.

Bank Negara Malaysia (BNM) maintained its overnight policy rate at 3.00% on Thursday, in line with market expectations, after it unexpectedly raised rates in May.

The central bank said its “monetary policy stance is slightly accommodative and remains supportive of the economy” at the current interest rate.

“The Monetary Policy Committee will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability,” the central bank said in a statement.

Headline and core inflation are projected to trend lower as expected in the second half of the year, it said.

BNM has forecast headline inflation to average between 2.8% to 3.8% in 2023, compared with 3.3% last year. Economic growth is expected to moderate to 4% to 5% this year.

“We don’t expect BNM to alter policy for at least the next 12 months,” said Alex Holmes, senior economist at Oxford Economics.

Worries over economic growth will begin to mount over the coming months, with a weaker ringgit also a drag.

“We see the biggest risk of more hikes stemming from a weak ringgit, which should remain under pressure,” Holmes said.

The ringgit is the worst-performing currency in Southeast Asia this year. BNM has said it would intervene in the foreign exchange markets to stabilise the ringgit, which has dropped nearly 6% against the U.S. dollar this year.

All but three of the 25 economists polled by Reuters had expected the central bank to maintain its overnight policy rate at 3.00%, with a majority forecasting that rates would remain unchanged for the rest of the year.

At its previous policy meeting in May, the central bank had surprised by hiking rates for the fifth time since last year, citing a need to manage persistent inflation amid robust domestic demand.

Headline inflation, however, has eased in recent months. The consumer price index in May rose 2.8%, its slowest annual pace this year.

Mohd Afzanizam Abdul Rashid at Bank Muamalat Malaysia said the central bank wants to keep its options open on a rate increase subject to policy changes in subsidies and price controls – which would have an impact on inflation.

Prime Minister Anwar Ibrahim has said the government was reviewing its subsidies programme.

Thursday’s rate decision was the first major policy announcement by BNM under its newly appointed governor – central bank veteran Abdul Rasheed Ghaffour – who took up the post on July 1.

(Reporting by A. Ananthalakshmi and Rozanna Latiff; Editing by Martin Petty and Jacqueline Wong)

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