Malaysia's central bank leaves key rate steady, sees vaccine boost to economy

[KUALA LUMPUR] Malaysia's central bank kept its benchmark interest rate steady at a record low on Thursday on expectations a recently launched Covid-19 vaccination programme will help boost consumer and business sentiment, underpinning an economic recovery.

Bank Negara Malaysia (BNM) left its overnight policy rate unchanged at 1.75 per cent, as forecast by a majority of analysts in a Reuters poll.

While coronavirus curbs imposed in January would hit first quarter growth, the central bank expected a pick-up from the second quarter thanks to a rebound in global demand, greater private and public spending and continued policy support.

"The roll-out of the domestic Covid-19 vaccine programme will also lift sentiments and economic activity," BNM said in a statement.

BNM held rates for a fourth straight meeting after cutting them by a total of 125 basis points last year, the last one in July.

"The MPC considers the stance of monetary policy to be appropriate and accommodative," BNM added.

Malaysia's economy shrank 5.6 per cent in 2020, its biggest full-year contraction in over two decades, as the government imposed strict coronavirus curbs for most of last year to try to contain the epidemic.

Authorities now hope a Covid-19 vaccination programme launched in late February will help fuel a recovery from the economy's worst performance since the Asian Financial Crisis.

The inoculation drive also came at the tail-end of a second nationwide lockdown, which prompted some analysts to downgrade their 2021 growth forecasts.

Malaysia's infection rate has since eased according to health officials, but the total caseload has surpassed 300,000, making it the third largest in Southeast Asia after Indonesia and the Philippines.

The government in November had forecast the economy would rebound and grow 6.5 per cent-7.5 per cent in 2021. Finance Minister Tengku Zafrul Abdul Aziz said in February the country was on track to achieve this, according to local media.

REUTERS