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Malaysia Central Bank Maintains Key Rate As Expected

Malaysia central bank retained its key interest rate on Tuesday, after cutting it in May, as policymakers assessed the current stance as supportive of economic activity.

The Monetary Policy Committee of Bank Negara Malaysia decided to leave the overnight policy rate at 3.00 percent. The outcome of the meeting came in line with expectations.

The previous change in the interest rate was a quarter-point reduction in May, which was the first cut since July 2016.

The MPC said the current stance remains accommodative and supportive of economic activity. Policymakers said they will continue to assess the balance of risks to both growth and inflation and ensure that the stance remains conducive.

Growth will be underpinned by domestic demand as slower global growth and trade tensions weigh on exports, the bank noted. Further, stable labor market conditions support household and capital spending.

The economy is forecast to grow in the range of 4.3-4.8 percent. However, the bank cautioned that the projection is subject to downside risks largely due to worsening trade tensions and weakness in commodity-related sectors.

Inflation is forecast to rise in months ahead as the impact of the changes in consumption tax policy lapses. Inflation will be dependent on global oil prices and policy measures, the bank noted.

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