(Repeat, adding details)
KUALA LUMPUR, Jan 20 (Reuters) – Malaysia’s central bank left its benchmark flat rate unchanged on Wednesday but held the ajar door for further monetary stimulus while the country struggled with new locks and compliance with coronavirus cases.
Bank Negara Malaysia (BNM) maintained its overnight policy rate at a low of 1.75%. Five out of 15 economists in a Reuters poll had expected the move, but a majority had predicted a rate cut.
Malaysia’s central bank said its current monetary stance is “appropriate and reasonable”, with the expectation that new coronavirus restrictions introduced last week will have less of an impact on the economy. last year.
But they said they were committed to “using their policy levers as appropriate” to aid sustainable recovery, highlighting the potential risks of any further increase in coronavirus cases or delays. in vaccine distribution.
“Given the uncertainties surrounding the pandemic, the ongoing position of monetary policy will be determined by new data and information, and the impact they will have on the overall outlook for inflation and domestic growth, ”said BNM.
The KLSE benchmark stock index rose 0.64% and the ringgit strengthened 0.15% after the central bank’s announcement.
Malaysia suffered its first economic downturn in more than a decade last year when COVID-19 hit.
While the economy showed signs of a reversal in the third quarter as coronavirus loops declined, a more serious revolution prompted the government to install new locks in the capital and five states last week.
“For 2021, while the reintroduction of stricter containment measures will impact near-term growth, the impact will not be as severe as in 2020,” the central bank said, adding that the growth path is expected to develop “from the second quarter onwards. ”
The government’s decision to allow key sectors to continue operating during the current lockout would help reduce economic output, said Alex Holmes, Asian economist for Capital Economics.
“But the economy will continue to be hit hard … with the near-negative outlook for the economy, we believe it is easier to mitigate,” Holmes said in a research note.
He expected a 25-point cut to the BNM benchmark level at its next meeting in March.
In a separate statement, BNM said it will extend the flexibility period for bank bond institutions to use government bonds to meet their statutory asylum requirements (SRR) until December 31, 2022, from an earlier expiration date of May 31. year. The move is likely to increase liquidity in the banking system.
$ 1 = 4.0420 ringgit Additional imitation by Liz Lee; Edited by Ana Nicolaci da Costa