Malaysia central bank keeps policy rate unchanged, as expected

[KUALA LUMPUR] Malaysia's central bank left its overnight policy rate unchanged at 3.25 per cent on Thursday, reiterating that its key interest rate remains accommodative to growth, and that bigger spending domestically will help offset the impact of weak oil prices. "Investment activity is expected to be led by capital spending in the export-oriented industries, the services sector and for infrastructure projects," Bank Negara Malaysia's (BNM) monetary policy committee said in a statement. "These investments will cushion the impact of the lower oil and gas-related investment activity." All 16 economists in a Reuters poll had expected the central bank to stand pat on interest rates as policymakers see limited downside risk to the economy.

Several economists have said they expect Bank Negara to lower its benchmark rate by 25 basis points later this year as economic fundamentals may weaken.

The Southeast Asian country's reserves have slumped to 4-1/2-year lows due to a slide in global oil prices since last year, but weak exports are showing signs of bottoming out due to recovering demand in key markets.

REUTERS