Malaysia C. Bank Holds Interest Rate at Record Low, Says Ukraine conflict a Key Risk

MACROECONOMICS - KUALA LUMPUR. Malaysia's central bank kept its benchmark interest rate at a record low on Thursday, in line with expectations, as the country's economic recovery gathers pace.

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

Despite a recent moderation in economic activity due to Omicron-driven 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, expanding 3.6% on-year, with the central bank expecting the rebound to continue this year despite risks of further disruptions caused by the coronavirus pandemic.

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But war in Ukraine is adding fresh uncertainty.

Bank Negara said developments surrounding the conflict in Ukraine have emerged as a key risk to global growth and trade 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 supply chain disruptions, and developments surrounding COVID-19," it said.

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

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