(Bloomberg) -- Malaysia’s central bank, which paused its tightening push in the past two meetings, isn’t on a “pre-set” policy path and will remain responsive to evolving conditions including any price flare ups, according to Governor Nor Shamsiah Yunus.

“The MPC remains vigilant to factors driving inflation including those arising from financial market developments, which could shift our assessment to the inflation outlook,” Shamsiah said in Kuala Lumpur on Wednesday, referring to the authority’s Monetary Policy Committee. 

“We are also mindful of the risk that price pressures could last longer than expected especially if upside risks materialize,” she said at a briefing after releasing BNM’s annual report. “We do acknowledge that this is a delicate balancing act especially in the context of this uncertain economic environment. With such consideration in mind, there is potential for the degree of accommodation to be further adjusted.”

Malaysia, which was the first in the region to pause its tightening cycle to assess the impact of last year’s 100 basis-points of increases, has a growth trajectory that gives it some scope to resume hiking if required. While consumer prices have come off highs, both the headline and core gauges remain elevated.

Malaysia Widens Growth Forecast Amid Rising Global Uncertainty

BNM said on Wednesday it now expects this year’s gross domestic product growth to quicken between 4% to 5%, compared with the government’s earlier forecast of a 4.5% expansion. The central bank, which kept the benchmark rate at 2.75% for a second straight meeting this month, will hold its next review on May 3.

“It seems likely from the Governor’s comments that at least one more rate hike will be delivered to complete the normalization cycle,” said Brian Tan, an economist at Barclays Plc, who expects another quarter-point increase at the July meeting.

Others including Maybank Investment’s Chief Economist Suhaimi Ilias concurred that the current pause wasn’t the end of the tightening cycle.

Inflation risk is still biased to the upside in view of the government’s “fluid policy on subsidies,” Suhaimi said, referring to Prime Minister Anwar Ibrahim’s pledge to target subsidies to cut public debt. “A pause so far this year is not the end of the hike cycle,” he said. Maybank forecasts a quarter-point increase in the second half of the year.

Malaysia cut electricity subsidies to large businesses in December and plans to tackle concessions on diesel before loosening price caps on gasoline, moves that are widely expected to spur inflation.

Shamsiah declined to provide any guidance on BNM’s likely peak rate.

“What is important is for us not to overshoot or undershoot,” she said. “I acknowledge here a delicate balancing act and as such we will continually assess the evolving conditions and we need to remain agile and respond to any changes.”

--With assistance from Chester Yung, Joy Lee and Ravil Shirodkar.

(Updates with economist comment in seventh paragraph)

©2023 Bloomberg L.P.