Should the US Federal Reserve decide to raise interest rates in June, Malaysian policymakers are generally confident their markets can weather the potential fallout. Ringgit weakness in recent weeks – after touching 4.40/$ in January, it strengthened to 3.85/$ in April before retreating again to around 4.10/$ – is considered “rational” against a globally strengthening dollar. Officials do not see current capital outflows as a sign of investor pessimism. Most importantly, Medley Global Advisors, a macro research service owned by the FT, says it does not expect the ringgit to face volatility on the scale of last year, when falling commodity prices and political turmoil drove the currency to record lows. Instead, it anticipates the ringgit can maintain a level of just over (ie, weaker than) 4/$, with depreciation pressure due to the increasing odds of a Fed hike offset by relatively stable oil prices and the fact that the political controversy surrounding Prime Minister Najib Rezak is these days at a simmer rather than threatening to boil over. In addition, the appointment of former deputy governor Muhammed Ibrahim as the new head of Bank Negara Malaysia has been cheered by markets. Investors think he will try to uphold the central bank’s independence as fiercely as his predecessor, the formidable Zeti Akhtar Aziz, rather than bending to the government’s will. As far as the economy is concerned, a weaker ringgit is both a help and a hindrance. It should boost exports over time but, more immediately, it may have some impact on investment as both private and public companies delay capital imports. Infrastructure investment is a big theme in Malaysia – as it is in neighbouring Indonesia – and already, first-quarter GDP growth of 4.2 per cent was the slowest in six years. Still, central bank officials point to private consumption gradually gaining momentum over the past few quarters despite slower credit growth. And electric and electronic exports continue to show resilience, helping to keep wages up and unemployment low. Moreover, a series of micro measures announced last January to boost consumption, such as pension contribution deferments, and the upcoming holiday season will probably mean better consumption numbers during the current quarter. Therefore, BNM staff remain confident that the bank’s 4-4.5 per cent growth forecast for this year is achievable and could even come in at the top end of the range with a bit of help from improving global demand in the second half. Therefore, the bank’s policymakers – who next meet on July 13 – feel no urgency to cut interest rates and, barring unforeseen external shocks, are comfortable keeping the overnight policy rate at 3.25 per cent for a prolonged period.