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Malaysia Holds Key Rate Steady

Malaysia's central bank left its key interest rate unchanged again as policymakers assessed that the economic growth is set to improve in the quarters ahead due to revival in external demand and consumer spending.

The Monetary Policy Committee decided to maintain the Overnight Policy Rate at 1.75 percent, Bank Negara Malaysia said in a statement Thursday. That was in line with economists' expectations.

The previous change in the rate was a quarter-point reduction in July last year.

"The MPC considers the stance of monetary policy to be appropriate and accommodative," the central bank said.

Policymakers expect growth to improve from the second quarter onwards, driven by the recovery in global demand, increased public and private sector expenditure amid continued support from policy measures and more targeted containment measures.

The roll-out of the domestic COVID-19 vaccine programme is also expected to lift sentiments and economic activity.

"The growth outlook, however, remains subject to downside risks, stemming mainly from ongoing uncertainties in developments related to the pandemic, and potential challenges that might affect the roll-out of vaccines both globally and domestically," the bank said.

Higher global oil prices are expected to boost inflation. Continued spare capacity in the economy is set to keep core inflation subdued.

The bank's latest actions suggest that it is not eager to loosen policy and rates are likely to remain to remain on hold for the foreseeable future, Capital Economics economist Alex Holmes said.

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