Bank Negara seen holding key rate amid extended lockdown

 

Bank Negara Malaysia is expected to leave its key interest rate unchanged, a Reuters poll showed on Tuesday, amid an extended nationwide lockdown imposed to contain a surge in Covid-19 infections.

Twelve of 13 economists surveyed by Reuters saw BNM keeping its overnight policy rate steady at 1.75 percent on Thursday. The central bank had cut its benchmark rate by 125 basis points last year.

"The economy is likely to see an uneven impact from the latest lockdown, and more targeted measures - rather than a policy-rate cut - may be more appropriate," Standard Chartered said in a note.

Analysts said additional fiscal measures and improved external demand should lend more support. Malaysia last week announced an RM150 billion aid package, including an RM10 billion direct fiscal injection, cash aid and subsidies.

The country's economy contracted 5.6 percent in 2020, its worst annual performance since the Asian financial crisis, due to strict coronavirus curbs over most of the year.

In the first quarter of 2021, it shrank 0.5 percent year-on-year, less than expected, thanks to higher domestic spending and exports.

Malaysia has reported more than 785,000 cases of Covid-19, the third-highest in Southeast Asia after Indonesia and the Philippines, although its vaccination rate is higher than most of its neighbours.

The government imposed fresh lockdowns in June. While measures have since been partially relaxed in some states, the number of infections remain stubbornly high in the capital Kuala Lumpur and surrounding areas, which remain under strict curbs.

- Reuters