Malaysia Central Bank Keeps Key Rate Unchanged as Risks Mount

(Bloomberg) --

Malaysia's central bank kept its benchmark interest rate unchanged on Tuesday, giving itself policy space to act in coming months if the global economy worsens.

The central bank held its overnight rate at 3% at its final meeting for the year, as predicted by 16 of the 25 economists surveyed by Bloomberg. The remaining nine had expected a 25 basis-point cut.

At the current rate “the stance of monetary policy remains accommodative and supportive of economic activity,” the central bank said in a statement.

Malaysia was among the first in Asia to ease borrowing costs this year, and was followed shortly after by several central banks, from India to the Philippines, taking more aggressive action to spur growth in their economies. Some economists predict Bank Negara will ease monetary policy next year as global growth deteriorates.

Exports are showing some strain from the U.S.-China trade tension and global slowdown, with shipments sliding by the most in three years in September. After a surprise improvement in the second quarter, economists expect economic growth will be more muted for the rest of 2019, with median forecasts of 4.4% and 4.1% in third and fourth quarters respectively.

The central bank said growth “is expected to be within projections in 2019 and the pace sustained going into 2020,” underpinned by private sector investment. Growth forecasts are subject to “downside risks,” mainly due to the uncertain global economy, it said.

Inflation remains muted, averaging 0.6% in the first nine months of the year on the back of falling transport costs. That's below the government's forecast of 0.9% for the whole of 2019. The central bank said average inflation next year will be “higher but remain modest.”

--With assistance from Tomoko Sato.

To contact the reporter on this story: Anisah Shukry in Kuala Lumpur at ashukry2@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net;Yudith Ho at yho35@bloomberg.net

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