Malaysia’s central bank keeps interest rates at record high, says Ukraine conflict key risk

KUALA LUMPUR: Malaysia’s central bank kept its benchmark interest rate at a historic low on Thursday, in line with expectations, as the country’s economic recovery gains momentum.

A Reuters poll showed 19 economists surveyed expect Bank Negara Malaysia (BNM) to keep its key overnight rate at 1.75%, although some expect a rate hike in the third quarter.

Despite a recent moderation in economic activity due to Omicron-induced COVID-19 resurgences, the overall global economic recovery trajectory remains on track, the central bank said in a statement.

Malaysia’s economy returned to growth in the October-December quarter, growing 3.6% year on year, with the central bank expecting the rebound to continue this year despite downside risks. new disruptions caused by the coronavirus pandemic.

But the war in Ukraine adds new uncertainty.

Bank Negara said developments surrounding the conflict in Ukraine emerged as a major risk to global growth and business prospects, commodity prices and financial market conditions.

“Risks to the growth outlook remain tilted to the downside due to external and domestic factors. These include weaker-than-expected global growth, ongoing geopolitical conflicts, worsening global supply chain and developments surrounding COVID-19,” he said.

The central bank said the stance of its monetary policy will continue to be determined by new data and their implications for the overall outlook for domestic inflation and growth.

(Reporting by Liz Lee; Editing by Christopher Cushing and Kim Coghill)

Stephen V. Lee