(Sept 22): Malaysia’s three-year government bonds rose, pushing the yield to a five-week low, on speculation the central bank will refrain from increasing the benchmark interest rate again this year.

Bank Negara Malaysia kept the policy rate at 3.25 percent on Sept. 18, citing steady growth prospects and stabilizing inflation, after raising borrowing costs in July for the first time since 2011. Official figures published this month show consumer-price increases were just below a three-year high in August, while the expansion in exports and factory output slowed to the least in more than a year in July.

“The market took the policy statement a little on the dovish side,” said Vivek Rajpal, a Singapore-based rates strategist at Nomura Holdings Inc. “Bank Negara is open to a hike but it’s still a probability and not a given.”

The yield on the 3.394 percent notes due in March 2017 declined two basis points, or 0.02 percentage point, to 3.49 percent as of 10:06 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. That adds to last week’s nine basis point drop, the steepest since the bonds were sold in March.

The ringgit strengthened 0.1 percent to 3.2295 per dollar. While the currency has appreciated 1.4 percent this year, it reached a four-month low of 3.2483 on Sept. 19. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell four basis points to 6.92 percent.

Growth Outlook

Ten of 21 economists surveyed by Bloomberg predict that Bank Negara will keep the policy rate on hold for rest of the year, while 11 see another 25 basis-point increase.

“The prospects are for the Malaysian economy to remain on a steady growth path,” the central bank said in a statement after last week’s rate review. “Inflation is expected to remain relatively stable for the remainder of the year.”

Malaysia upgraded its 2014 economic growth forecast to a range of 5.5 percent to 6 percent from 5 percent to 5.5 percent, after gross domestic product increased an average 6.3 percent in the first half, according to a Business Times report today that cited Second Finance Ahmad Husni Hanadzlah.

Consumer prices advanced 3.3 percent in August from a year earlier, exceeding the median estimate of economists for a 3.2 percent rise and near the three-year high of 3.5 percent recorded in March and February, a Sept. 17 report showed.