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Malaysia: Bank Negara seen holding key rate tomorrow
KUALA LUMPUR: Bank Negara is expected to leave its key interest rate steady tomorrow, according to a Reuters poll, as a slowdown in new coronavirus infections and a recently launched vaccination drive boost confidence in the economic recovery.
Eleven out of 15 economists saw Bank Negara keeping its overnight policy rate at a record low of 1.75%, a Reuters poll showed yesterday with four forecasting a 25 basis point cut. Bank Negara cut rates by a total of 125 basis points in 2020.
Malaysia’s economy saw its biggest full-year contraction in over two decades last year as it imposed strict coronavirus curbs for most of 2020.
The economy shrank 5.6% – its worst performance since the Asian Financial Crisis.
“The country’s vaccination programme will boost confidence, and export performance continues to shine, ” HSBC said.
The government launched its Covid-19 inoculation programme on Feb 24. Official daily figures have shown a slowdown in infections but the total case tally has surpassed 300,000 cases, the third highest in South-East Asia after Indonesia and the Philippines.
“We now expect the policy rate to remain unchanged at 1.75% this year, ” HSBC said, revising an earlier forecast for a 25 basis point cut in 2021.
Malaysia’s exports rose 6.6% in January from a year earlier, buoyed by higher shipments of electronic goods and rubber products. Exports recovered from the fallout of the pandemic in the second half of last year, hitting a 23-month high in September.
“While sectors such as hospitality may continue to be impacted by social-distancing measures, targeted supportive measures remain to help affected businesses and individuals, ” Standard Chartered said in a research note.
In November, the government unveiled a record RM322.5bil budget for this year, aimed at spurring economic activity and support growth. — Reuters