Company News

UPDATE1-Malaysia's holds key rate steady at record low

KUALA LUMPUR, Jan 20 (Reuters) - Malaysia’s central bank left its key benchmark interest rate unchanged on Wednesday, bucking expectations it would provide further monetary support to an economy facing fresh lockdowns amid surging coronavirus cases.

Bank Negara Malaysia (BNM) kept its overnight policy rate at a record low of 1.75%, saying it considered its current monetary stance “appropriate and accommodative”.

Five out of 15 economists in a Reuters poll had expected the move, but a majority had forecast a rate cut.

Malaysia suffered its first economic recession in over a decade last year as COVID-19 hit. Although it showed signs of rebounding in the third quarter as coronavirus curbs eased, a worsening outbreak prompted the government to impose fresh lockdowns earlier this month.

“For 2021, while near-term growth will be affected by the re-introduction of stricter containment measures, the impact will be less severe than that experienced in 2020,” the central bank said in a statement, adding that the growth trajectory would likely improve “from the second quarter onwards.”

But it added the overall outlook remained subject to “downside risks”, including any resurgence in coronavirus infections or delays in mass vaccinations.

In a separate statement, BNM said it will extend the duration of flexibility for banking institutions to use government bonds to meet their statutory reserve requirements to Dec. 31, 2022, from an earlier cut-off date of May 31 this year.

The central bank also said it was committed to using its policy levers “as appropriate” to aid a “sustainable” economic recovery.

The government imposed a 14-day lockdown from Jan. 13 in Malaysia’s capital and five states. To soften the blow to the economy, Prime Minister Muhyiddin Yassin unveiled on Monday 15 billion ringgit ($3.71 billion) in additional stimulus measures.

Muhyiddin has also said the effects on the economy of the restrictions are expected to be “manageable” compared with last year’s nationwide lockdown between March and April.

$1 = 4.0480 ringgit Reporting by Joseph Sipalan; Editing by Ana Nicolaci da Costa