KUALA LUMPUR, Sept. 10 (Xinhua) -- The Malaysian Central Bank on Thursday maintained its overnight policy rate (OPR) at 1.75 percent.
The central bank said in a statement that the cumulative 125 basis points reduction in the OPR this year would continue to provide stimulus to Malaysian economy.
"Given the outlook for growth and inflation, the Monetary Policy Committee (MPC) considers the stance of monetary policy to be appropriate and accommodative," said the central bank.
The central bank also said it remains committed to utilize its policy levers as appropriate to create enabling conditions for a sustainable economic recovery.
Looking ahead, the central bank anticipated Malaysian economy to continue to improve in 2021, supported by the recovery in external demand and expansion in private sector expenditure.
"However, the pace of recovery will be uneven across sectors, with economic activity in some industries remaining below pre-pandemic levels, and a slower improvement in the labor market.
"This outlook is still subject to downside risks, particularly from ongoing uncertainties surrounding the course of the pandemic domestically and globally," said the bank.
The central bank said that Malaysian economic activity continues to recover from the trough in April this year, with latest high frequency indicators show that labor market conditions, household spending and trade activity have continued to improve.
Also supporting the economic recovery are the fiscal stimulus packages, alongside monetary and financial measures, it added.
On the global economy, the central bank said that the outlook was still subject to downside risks and uncertainty, primarily due to the risk of a resurgence of the pandemic and weaker labor market conditions.
"The re-opening of production facilities has led to a resumption of manufacturing and trade activity. However, the recovery in the services sector has been slower," said the central bank.
Meanwhile, the central bank expects Malaysia's inflationary pressures to remain muted in 2020.
Headline inflation is likely to average negative in 2020 given the substantially lower global oil prices, and average higher in 2021, within the earlier projected ranges, it said.
"The outlook, however, will continue to be significantly affected by global oil and commodity prices. Underlying inflation is expected to be subdued amid spare capacity in the economy," it added.
Although the central bank left its main policy rate on hold, with the economy likely to remain weak for some time, economists doubt this marks the end of the central bank's easing cycle.
Capital Economics said in a note Thursday that there is a strong case for more easing, and it expects one more 25 basis point rate cut at the central bank's last meeting of the year in November, followed by a further 50 basis points of easing in 2021. Enditem
