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Financial News: Malaysia Central Bank Holds Key Rate As Expected

Malaysia Central Bank Holds Key Rate As Expected

07/08/2021 - 05:22:00 (RTTNews)

(RTTNews) - Malaysia's central bank left its key interest rates unchanged on Thursday despite significant downside risks to economic growth outlook.

The Monetary Policy Committee of Bank Negara Malaysia decided to maintain the Overnight Policy Rate at 1.75 percent.

The economy performed better-than-expected in the first quarter of 2021. The re-imposition of nationwide containment measures will curb virus infections cases but will dampen the growth momentum, the bank said.

Going forward, the gradual relaxation of containment measures, alongside the rapid progress of the domestic vaccination programme and continued strength in external demand will provide support for the growth recovery into 2022, the bank said.

Nonetheless, the growth outlook remains subject to significant downside risks. The increase in inflation is forecast to be transitory and headline inflation is projected to moderate in the near term as this base effect dissipates.

Core inflation is expected to remain subdued, averaging between 0.5 percent and 1.5 percent for the year, amid continued spare capacity in the economy.

Given the uncertainties surrounding the pandemic, the stance of monetary policy will continue to be determined by new data and information and their implications on the overall outlook for inflation and domestic growth.

The decision to hold the interest rate despite the poor 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, the BNM will leave interest rates at their current low until at least the end of 2022, the economist added.

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