Bank Negara Malaysia holds key rate at 3%, says economy on the mend

[KUALA LUMPUR] Malaysia's central bank held its key interest rate at 3 per cent on Thursday as expected, on optimism that the economy is recovering after a year of tepid growth.

Nine out of 10 economists polled by Reuters forecast the central bank would keep its overnight rate unchanged.

With the key rate at 3 per cent, "the stance of monetary policy is accommodative and supportive of economic activity", Bank Negara Malaysia (BNM) said.

It said the policy committee "will continue to assess the balance of risks surrounding the outlook for domestic growth and inflation".

BNM said that the economy's growth momentum is expected to sustain through the year, underpinned by private sector activity and supported by the turnaround in net exports.

Economic growth slumped for more than a year, before the pace increased in late 2016. Malaysia's full-year 2016 growth was 4.2 per cent.

"With the growth of domestic demand being sustained, the more positive contribution from the external sector will lead to a better performance of the Malaysian economy," the bank said.

In July, BNM cut its key rate by 25 basis points, the first trim in more than seven years.

REUTERS