Malaysia’s Central Bank Seen Holding Key Rate As Infections Slow, COVID-19 Vaccination Starts

Malaysia
FILE PHOTO: A general view of the Central Bank of Malaysia (Bank Negara Malaysia) in Kuala Lumpur, Malaysia, July 31, 2019. REUTERS/Lim Huey Teng

KUALA LUMPUR ⸺ Malaysia’s central bank is expected to leave its key interest rate steady on Thursday, according to a Reuters poll, as a slowdown in new coronavirus infections and a recently launched vaccination drive boost confidence in the economic recovery.

Eleven out of 15 economists saw Bank Negara Malaysia (BNM) keeping its overnight policy rate at a record low of 1.75%, a Reuters poll showed on Tuesday, with four forecasting a 25 basis point cut. BNM cut rates by a total of 125 basis points in 2020.

Malaysia’s economy saw its biggest full-year contraction in over two decades last year as it imposed strict coronavirus curbs for most of 2020. The economy shrank 5.6% – its worst performance since the Asian Financial Crisis.

“The country’s vaccination programme will boost confidence, and export performance continues to shine,” HSBC said in a research note.

The government launched its COVID-19 inoculation programme on Feb. 24. Official daily figures have shown a slowdown in infections but the total case tally has surpassed 300,000 cases, the third highest in Southeast Asia after Indonesia and the Philippines.

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“We now expect the policy rate to remain unchanged at 1.75% this year,” HSBC said, revising an earlier forecast for a 25 basis point cut in 2021.

Malaysia’s exports rose 6.6% in January from a year earlier, buoyed by higher shipments of electronic goods and rubber products. Exports recovered from the fallout of the pandemic in the second half of last year, hitting a 23-month high in September.

“While sectors such as hospitality may continue to be impacted by social-distancing measures, targeted supportive measures remain to help affected businesses and individuals,” Standard Chartered said in a research note.

In November, the government unveiled a record 322.5 billion ringgit ($79.57 billion) budget for this year, aimed at spurring economic activity and support growth.

It had earlier rolled out 305 billion ringgit worth of stimulus measures for 2020, ranging from cash handouts to wage subsidies and loan moratoriums.

Reporting by Joseph Sipalan; Editing by Ana Nicolaci da Costa; Reuters

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