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Malaysia central bank to hold rates until mid-2022 - Reuters poll

Malaysia central bank to hold rates until mid-2022 - Reuters poll

FILE PHOTO: A man walks past the entrance of Central Bank of Malaysia (Bank Negara Malaysia) in Kuala Lumpur, Malaysia, July 31, 2019. REUTERS/Lim Huey Teng

BENGALURU : Malaysia's central bank will keep its key interest rate on hold on Wednesday to support the economy as it gradually reopens amid an intense COVID-19 vaccination drive, according to Reuters poll of economists.

The central bank slashed its benchmark rate by 125 basis points last year to bolster the economy as the pandemic took hold.

All 22 economists polled Oct. 25-29 expected Bank Negara Malaysia (BNM) to keep its overnight policy rate at 1.75per cent this week.

Median forecasts showed the first hike, of 25 basis points, would not come until the third quarter of next year. A slight majority, 11 of 20 economists, expected rates to be at least that much higher by then.

"The key indication to look for is whether the recovery is fully entrenched," said Nazmi Idrus, senior economic analyst at RHB Investment Bank. "If all goes well, the release of Q2 GDP around August or Q3 GDP in November next year should be a great time for them to announce rate normalisation."

With more than 70per cent of the population inoculated and new infections falling sharply, the government is easing restrictions and the economy is on a rebound.

"A further boost could come from the intended re-opening of Malaysian borders to international travellers next month," said Debalika Sarkar, economist at ANZ.

"We also note that external trade concurrently remains robust, supported by the continued strength of the tech cycle as well as the boost to its terms of trade from robust commodity prices."

A Reuters poll last month predicted the economy would contract by 1.3per cent last quarter but expand 4.0per cent in the current three-month period. Full-year growth expectations were 4.0per cent and 5.9per cent for 2021 and 2022 respectively.

The government has rolled out stimulus packages worth 530 billion ringgit (US$128 billion).

It announced on Friday an expansionary budget for next year, with plans to spend 332.1 billion ringgit in 2022 compared to 320.6 billion ringgit this year.

The poll was conducted before the budget announcement but analysts who participated in the poll had mostly expected higher spending.

(US$1 = 4.1390 ringgit)

(Reporting by Shaloo Shrivastava; Polling by Devayani Sathyan and Vivek Mishra; Editing by Ross Finley and Catherine Evans)

Source: Reuters

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