By Chester Tay
Malaysia's central bank kept its benchmark interest rate unchanged on Wednesday as the country's latest Covid-19 lockdown is expected to have a less severe impact than in 2020.
Bank Negara Malaysia held its overnight policy rate at 1.75%. Seven of 12 economists polled by The Wall Street Journal had expected a rate cut, while the remaining five thought the central bank would stand pat.
Bank Negara Malaysia said that while near-term growth will be affected by the re-introduction of stricter containment measures, it expects the growth trajectory to improve from the second quarter onward.
That improvement should be driven by the recovery of global demand, a turnaround in public and private sector expenditure at home amid continued policy support, and higher production at manufacturing and mining facilities, the central bank said. The rollout of vaccines in the coming months should also boost sentiment, it said.
Bank Negara expects headline inflation to average higher this year, primarily due to higher global oil prices.
"Underlying inflation is expected to remain subdued amid continued spare capacity in the economy," it said.
The central bank said downside risks remain, mainly due to the uncertainties surrounding the pandemic and potential challenges that might affect vaccine rollouts both globally and domestically.
The number of daily new Covid-19 cases hit a record high in Malaysia last week and the government declared a state of emergency, locking down the whole country except Sarawak state. The coronavirus has infected 165,371 people in the country so far and caused 619 deaths.
Write to Chester Tay at chester.tay@wsj.com
(END) Dow Jones Newswires
01-20-21 0245ET
