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Malaysia's Central Bank Keeps Rate On Hold

Malaysia's central bank decided to keep the rate unchanged as policymakers said the current stance is appropriate and accommodative.

The Monetary Policy Committee of Bank Negara Malaysia decided to maintain the overnight policy rate at 1.75 percent, as expected.

The committee repeated that it is committed to utilize its policy levers as appropriate to foster enabling conditions for a sustainable economic recovery.

Inflation is forecast to spike in the second quarter of 2021 due to the lower base from the low domestic retail fuel prices in the same period of 2020. Inflation is projected to average higher between 2.5 percent and 4.0 percent in 2021, primarily due to the cost-push factor of higher global oil prices.

The economic growth trajectory is projected to improve, driven by the stronger recovery in global demand and increased public and private sector expenditure amid continued support from policy measures.

However, the bank cautioned that growth outlook remains subject to downside risks, stemming mainly from ongoing uncertainties surrounding the pandemic, and potential challenges that might affect the roll-out of vaccines both globally and domestically.

The central bank decision to keep the rate unchanged today despite the worsening economic outlook means any further loosening is unlikely, Alex Holmes, an economist at Capital Economics, said.

But with the recovery set to be slow and fitful, BNM is likely to leave interest rates at their current low until at least the end of 2022, the economist added.

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