Malaysia kept its benchmark interest rate at a record low to support its nascent recovery, though warned the war in Ukraine has emerged as a “key” risk to global growth and trade.

Bank Negara Malaysia maintained the overnight policy rate at 1.75% on Thursday, a decision expected by all 22 economists in a Bloomberg survey. Borrowing costs have remained steady since July 2020, with analysts expecting monetary policy normalisation to start in the second half of the year.

Malaysia’s central bank said in a statement that the current stance of policy monetary is “appropriate and accommodative,” and would continue to be determined by new data and their implications on the outlook for inflation and growth. BNM is set announce its updated forecasts for the economy at the end of the month. 

Malaysia’s high vaccination rate has allowed the country to roll back virus curbs, which helped the economy rebound at the end of 2021 and lift optimism for the manufacturing sector. For this year, the government forecasts gross domestic product to grow within a range of 5.5% to 6.5%, from 3.1% in 2021, as it aims to reopen its borders as soon as next month. 

The recovery still faces risks, including Covid-19 flareups, protracted supply bottlenecks and the war between Russia and Ukraine. China’s slowing economy and the Federal Reserve’s policy tightening will further weigh on the economy, Finance Minister Zafrul Aziz said Wednesday.

Source: Bloomberg