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Malaysia’s central bank may signal it has room to resume cutting interest rates should economic conditions unexpectedly worsen, even as it holds borrowing costs steady for a third straight meeting today.

All 23 economists surveyed by Bloomberg News expect Bank Negara Malaysia to hold its overnight policy rate unchanged at 2 percent in the decision due at 6 p.m. The benchmark is at its lowest level since it was introduced in April 2004.

“We expect the statement to remain cautious on growth” amid the stabilizing domestic and global economies, said Rahul Bajoria, an economist at Barclays Capital in Singapore. “Bank Negara will likely continue to maintain a dovish stance in this policy meeting, with the governor suggesting recently that they are willing to move if there is any kind of slowdown.”

Governor Zeti Akhtar Aziz halted in April after cutting the benchmark rate by 1.5 percentage points between November and February, predicting Southeast Asia’s third-largest economy will resume growth in the fourth quarter after contracting in the first half. She said last month Malaysia has the “flexibility” to lower interest rates if external conditions deteriorate.

Neighboring Singapore emerged from its recession last quarter as the economy expanded from the previous three months for the first time in a year. Elsewhere, central banks from Thailand to South Korea have stopped lowering interest rates as policy makers anticipate a recovery from the world’s deepest recession since the Great Depression.

Biased Toward Growth

“I would expect them to acknowledge that global demand is stabilizing and that the region has returned to growth,” said Matt Hildebrandt, an economist at JPMorgan Chase & Co cheap payday loan. in Singapore. “However, I expect Bank Negara to remain cautious about the outlook. Policy will remain biased toward growth rather than inflation.”

Gross domestic product shrank 6.2 percent in the three months to March, the first decline since 2001, as exports of Malaysian Pacific Industries Bhd. semiconductors and other goods slumped. Zeti has said the economy probably posted a similar contraction last quarter and that the earlier rate cuts and 67 billion ringgit ($19 billion) of government stimulus plans will help support a recovery in the coming months.

Malaysia’s consumer prices fell 1.4 percent in June from a year earlier, the first decline in more than 22 years, as the shrinking economy hurt demand for goods and services and commodities costs eased from last year’s records.

The ringgit has strengthened more than 2 percent since Bank Negara first held rates steady on April 29, as investors speculated the central bank will refrain from cutting the benchmark interest rate further.

Credit Availability

The central bank may reiterate that its focus now is to ensure the availability of credit rather than lowering borrowing costs, said economists including David Cohen.

“They might allude to signs of a bottoming in the global downturn, but indicate continued emphasis on ensuring adequate flow of credit to the economy,” said Cohen, director of Asia forecasting at Action Economics in Singapore. “They will indicate patience in the face of subdued inflation and uncertainties clouding the economic outlook.”

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