Malaysia yesterday maintained its benchmark interest rate at a record low, supporting a nascent economic recovery as COVID-19 restrictions ease and inflation remains under control.
Bank Negara Malaysia (BNM) kept the overnight policy rate at 1.75 percent at its final monetary policy meeting of the year, a decision expected by all 18 economists in a Bloomberg survey. The central bank last lowered borrowing costs in July last year.
“Fiscal and financial measures will continue to cushion the economic impact on businesses and households and provide support to economic activity,” the central bank said in a statement. “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.”
Headline inflation is likely to average within the projected range of 2 to 3 percent this year, and would remain moderate next year, the central bank said.
Core inflation for this year is expected to average below 1 percent, it said.
The inflation outlook is subject to global commodity price developments and some risk from prolonged supply-related disruptions, it added.
“We continue to expect BNM’s policy rate to remain status quo until the second half of 2022,” said Muhammad Saifuddin Sapuan, an economist at Kuala Lumpur-based Kenanga Research.
“The inflation rate outlook remains low, and there is a need for monetary policy to stay accommodative to aid economic recovery along with the government’s sizeable fiscal expenditure next year,” he said.
Malaysia’s economy is beginning to rebound after a year spent under tight lockdown conditions.
Total trade rose to a record in September, driven by strong external demand and the easing of curbs in Kuala Lumpur and the industrial hub of Selangor.
The manufacturing purchasing managers’ index for last month was the highest since April, reversing the trend of contraction.
Still, the recovery is fraught with risks. The virus is spreading more rapidly again as activity picks up, and a statewide election in coming weeks could spark a new COVID-19 wave if social distancing rules are not followed.
Two fines have been issued to program organizers for failing to adhere to virus protocols, the Malaysian Ministry of Health said in a statement on Tuesday.
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