Malaysia’s central bank left its key interest rate unchanged on Thursday as policymakers assessed that the previous easing continue to provide stimulus to the [economy][1].
The Monetary Policy Committee of Bank Negara Malaysia decided to retain the overnight policy rate at 1.75 percent.
The central bank had last reduced its rate by 25 basis points in July.
Given the outlook for growth and inflation, the MPC considered that the stance of monetary policy to be appropriate and accommodative, the bank said in a statement.
While the economy is rebounding, there is still a strong case for more easing, Alex Holmes, an economist at Capital Economics, said. The economist expects one more 25 basis point rate cut at the last meeting of the year in November, followed by a further 50 basis points of easing in 2021.
According to central bank, headline inflation will average negative in 2020 given the substantially lower global oil prices, and average higher in 2021. Underlying inflation is expected to be subdued amid spare capacity in the economy.
Policymakers observed that labor market conditions, household consumption and trade continued to improve, underpinned by fiscal stimulus and monetary easing.
Looking ahead, the improvement is expected to continue into 2021, supported by the recovery in external demand and expansion in private sector expenditure, the bank said.
But the MPC cautioned that the outlook is still subject to downside risks, particularly from ongoing uncertainties surrounding the course of the pandemic domestically and globally.
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