Thursday October 29, 12:08 AM
Malaysia holds key interest rate at 2.0 percent
Malaysia's central bank kept its key interest rate on hold at 2.0 percent Wednesday, saying the global outlook remains uncertain.
Bank Negara said an economic recovery was likely to be slow and uneven in view of the "ongoing adjustments."
"As price pressures and inflationary expectations are expected to remain contained going forward, the assessment is that the current monetary policy stance is appropriate and will continue to provide support to economic activity," it added.
The bank said there was strong evidence to suggest domestic conditions were improving with a recovery in economic activity.
"These improvements are more broad-based and are reflected in stronger labour market conditions, consumer and business sentiments, industrial production, financing activity and external trade," it added.
It said these positive developments were expected to continue into 2010, with growth in the domestic economy, "expected to continue to be supported by existing policy measures and the growing confidence in the private sector."
The bank said consumer prices declined 2 percent year on year in September, reflecting a cumulative fall in fuel prices since July 2008 and the easing pressure on food prices.
However, it said the decline was temporary and, excluding further unanticipated price adjustments and external influences, "inflation in 2010 is projected to be positive but remain subdued."
Last week, the government unveiled its 2010 budget, slashing public sector spending in a move to rein in a fiscal deficit swollen by stimulus measures aimed at pushing the economy out of recession.
While presenting the budget Prime Minister Najib Razak said: "Major indicators suggest the economy is on track to recovery."
He added: "Malaysia's economic fundamentals remain resilient, despite the more challenging environment in 2009."
The government in March unveiled a stimulus package worth 16.2 billion dollars.
Prime Minister Najib Razak said the economy would shrink by 3.0 percent this year, less than a 4.0-5.0 percent contraction tipped earlier, but that it could bounce back and post modest growth of 2.0-3.0 percent in 2010.
In February, the bank reduced its key interest rate by 50 basis points to 2.0 percent, an unprecedented third consecutive cut, as official data showed steep declines in exports and industrial production.
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