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KUALA LUMPUR: Malaysia’s central bank kept its benchmark interest rate at a record low today, while warning of downside risks that threaten the economy’s recovery.
Bank Negara Malaysia (BNM) kept its official overnight interest rate (OPR) at 1.75% at its last scheduled meeting of the year, as expected by 17 of the 22 economists surveyed by Bloomberg. The rest foresee a cut of 25 basis points.
It is the second consecutive meeting held by the central bank, after lowering its benchmark rate by 125 basis points from January to July.
The economy began to show signs of recovery at the end of the second quarter (Q2), when it contracted the most in more than two decades.
The “latest indicators point to a significant improvement in economic activity in the third quarter,” BNM said in a statement announcing the decision.
While current policy is “appropriate and accommodative,” the bank said it “remains committed to using its policy levers as appropriate to create the conditions for a sustainable economic recovery.”
Malaysia’s second quarter gross domestic product contracted further since the 1997 Asian financial crisis.
Now, a new wave of infections that emerged in late September risks delaying Malaysia’s recovery again.
Sabah’s state elections that month prompted a resurgence of the virus across the country, prompting renewed movement restrictions in several states. Efforts to contain the pandemic may affect economic performance in October and November, Prime Minister’s Department Minister (Economic Affairs) Mustapa Mohamed said yesterday.
Political uncertainty has weighed on the country’s financial markets.
In October, the Malaysian ringgit lagged most of its Asian peers, which strengthened thanks to a weak dollar.
Global funds drew a net US $ 161 million (RM670 million) from local stocks last month, with the benchmark equity index limiting its third consecutive month of losses.
