KUALA LUMPUR: Bank Negara Malaysia has decided to maintain its Overnight Policy Rate at 1.75 per cent after its Monetary Policy Committee meeting today.
The decision follows continued recovery in the global economy, although Bank Negara felt downside risks remained amid uncertainties surrounding Covid-19.
"The global economy continues to recover, led by improvements in manufacturing and export activity. However, the recent resurgences of Covid-19 cases and the subsequent containment measures have affected economic activity in several major economies.
"The expedited roll-out of mass vaccination programmes, together with ongoing policy support, are expected to lift global growth prospects going forward. Financial conditions also remain supportive," the central bank said in a statement today.
For Malaysia, the resurgence in Covid-19 cases and the introduction of targeted containment measures has affected the recovery momentum in the fourth quarter of 2020.
As a result, Bank Negara said growth for 2020 was expected to be near the lower end of the earlier forecasted range.
"For 2021, while near-term growth will be affected by the re-introduction of stricter containment measures, the impact will be less severe than that experienced in 2020. The growth trajectory is projected to improve from the second quarter onwards."
It added that the improvement would be driven by the recovery in global demand, turnaround in public and private sector expenditure amid continued support from policy measures, and higher production from existing and new manufacturing and mining facilities.
"The roll-out of vaccines in the coming months will also lift sentiments. Downside risks to the outlook remain, stemming mainly from ongoing uncertainties surrounding the dynamics of the pandemic and potential challenges that might affect the roll-out of vaccines both globally and domestically."
Bank Negara said in line with earlier assessments, the average headline inflation was expected to be negative in 2020 due mainly to the substantially lower global oil prices.
For 2021, headline inflation is projected to average higher, primarily due to higher global oil prices.
"Underlying inflation is expected to remain subdued amid continued spare capacity in the economy. The outlook, however, is subject to global oil and commodity price developments," it said.