Malaysian central bank maintains interest rate at 1.75 pct

0 Comment(s)Print E-mail Xinhua, March 4, 2021
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KUALA LUMPUR, March 4 (Xinhua) -- The Malaysian central bank has maintained the Overnight Policy Rate (OPR) at 1.75 percent following a Monetary Policy Committee (MPC) meeting on Thursday.

The Bank Negara Malaysia said in a statement that the MPC considered the current monetary policy to be appropriate and accommodative.

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

"The bank remains committed to utilising its policy levers as appropriate to foster enabling conditions for a sustainable economic recovery," it said.

The bank also said that the global economic recovery, while uneven, is gaining momentum supported by steady improvements in manufacturing and trade activity.

The ongoing roll-out of vaccination programs in many economies, together with policy support, will further facilitate an improvement in private demand and labor market conditions, it added.

While financial markets have experienced bouts of volatility, it said financial conditions remain supportive of economic activity.

"Risks to the growth outlook have abated slightly, but remain tilted to the downside, primarily due to uncertainty over the path of the COVID-19 pandemic and effectiveness of the vaccination programs."

For Malaysia, the bank said the latest indicators point to improvements in external demand and continued consumer spending.

While the re-imposition of containment measures will affect growth in the first quarter, it said, the impact is expected to be less severe than that experienced in the second quarter of 2020.

"Going forward, growth is projected to improve from the second quarter onwards, driven by the recovery in global demand, increased public and private sector expenditure amid continued support from policy measures and more targeted containment measures."

The bank also noted that the growth will also be supported by higher production from existing and new manufacturing facilities, particularly in the electrical and electronic (E&E) and primary-related sub-sectors, as well as oil and gas facilities.

The roll-out of the domestic COVID-19 vaccine program will also lift sentiments and economic activity, it said.

"The growth outlook, however, remains subject to downside risks, stemming mainly from ongoing uncertainties in developments related to the pandemic, and potential challenges that might affect the roll-out of vaccines both globally and domestically."

Meanwhile, the headline inflation in 2021 is projected to average higher, primarily due to higher global oil prices.

In terms of trajectory, the bank said headline inflation is anticipated to temporarily spike in the second quarter of 2021 due to the lower base from the low domestic retail fuel prices in the corresponding quarter of 2020, before moderating thereafter.

"Underlying inflation is expected to remain subdued amid continued spare capacity in the economy. The outlook, however, is subject to global oil and commodity price developments," it said.

Capital Economics's Asia economist Alex Homes said in a note on Thursday that the bank's actions suggested that it is not eager to loosen policy and expected rates to remain on hold for the foreseeable future.

"Given that the bank decided not to cut rates today despite the poor outlook for the economy, further easing now looks unlikely," he said. Enditem

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