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Malaysia holds key rate as expected; says current stance "appropriate"
March 7, 2013 / 10:01 AM / 5 years ago

Malaysia holds key rate as expected; says current stance "appropriate"

KUALA LUMPUR, March 7 (Reuters) - Malaysia’s central bank left its key interest rate unchanged at 3.00 percent on Thursday, as expected, saying the current monetary stance is appropriate for the country’s growth and inflation outlook.

A Reuters poll of 15 economists had predicted Bank Negara would stand pat on the overnight policy rate (OPR) as inflation remains mild.

But some economists said the central bank may consider hiking borrowing costs later in the year if prices begin to climb at a faster pace.

Bank Negara has kept the rate settings steady since May 2011.

“While inflation is expected to rise during the year, the expectation is for it to remain modest,” the central bank’s monetary policy committee said in a statement.

“In the domestic economy, the latest indicators point to robust investment activity and continued expansion in private consumption,” it said, adding that this trend is expected to continue going forward.

Malaysia reported surprisingly robust 6.4 percent growth in the fourth quarter, which analysts attribute to the government’s aggressive initiatives on a $444 billion economic transformation programme and the central bank’s accommodative monetary policy.

Price pressures could pick-up from the third quarter as disposable incomes rise and the expected global recovery spurs Malaysia’s trade-sensitive economy.

Policymakers are also watching to see if the implementation of a minimum wage policy on Jan. 1 will spur price pressures in coming months.

A separate Reuters poll showed that the country’s inflation could quicken later in the year, but remain within an average of 2.5 percent. Government-controlled petrol prices and electricity tariffs are expected to rise in the second half of 2012 after a general election is held.

For the full central bank monetary policy statement, click on (Reporting by Anuradha Raghu; Editing by)

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