Bank Negara holds interest rate at record low

Malaysia's central bank kept its benchmark interest rate unchanged at a record low on Thursday, as expected, to support the recovering economy.

All 23 economists surveyed in a Reuters poll had expected Bank Negara Malaysia (BNM) to hold its overnight policy rate steady at a record low of 1.75 percent.

The latest indicators show that economic activity rebounded in the fourth quarter for Malaysia, in line with the relaxation of Covid-19 containment measures, the central bank said in a statement.

The most recent data showed that Malaysia's economy shrank 4.5 percent in the third quarter after a rebound in the second quarter, but the central bank expected a quick recovery as coronavirus restrictions are eased and economic activities resume.

Since 2020, the government has rolled out RM530 billion in stimulus packages, while BNM has slashed its policy rate by 125 basis points to cushion the economic fallout of the pandemic.

Growth is expected to gain momentum this year, driven by stronger global demand and higher private sector expenditure amid improvements in the labour market and continued policy support, the bank said.

The central bank has forecast the economy will grow by between 5.5 percent and 6.5 percent this year, compared with an estimated 3 to 4 percent in 2021. Risks to that outlook remained, however.

"Such risks may arise from a weaker-than-expected global growth, a worsening in supply chain disruptions, and the emergence of severe and vaccine-resistant Covid-19 variants of concern," it said.

Malaysia's central bank will wait until at least July before raising interest rates, the Reuters poll found.

–Reuters