After record cuts, Bank Negara Malaysia seen holding key rate: poll

[KUALA LUMPUR] Malaysia's central bank is seen holding its key rate steady on Tuesday, according to a slim majority in a Reuters poll, amid a fresh surge in coronavirus cases and political uncertainty tied to a challenge to Prime Minister Muhyiddin Yassin's leadership.

Bank Negara Malaysia's (BNM) last monetary policy committee meeting for the year also comes just days before Muhyiddin's administration presents its first budget. Muhyiddin has saod the which the budget will on measures to counter the economic impact of the Covid-19 pandemic.

Nine out of 17 economists polled expect Bank Negara Malaysia (BNM) to keep its overnight policy rate at a record low of 1.75 per cent, after having already delivered 125 basis points of rate cuts this year.

The remaining eight economists expect the central bank to cut the policy rate by 25 bps to a record low 1.50 per cent.

Malaysia's export-reliant economy has shown "visible" signs of recovery, as shipments rebounded by 4.4 per cent in the third quarter after a 15.1 per cent contraction in the April-June quarter, according to Bank Islam chief economist Mohd Afzanizam Abdul Rashid.

"Our sense is that the Q3 2020 GDP could come in at positive growth, albeit at a marginal pace. As such, there is less incentive or motivation by the BNM to cut the policy rate," Mr Mohd Afzanizam told Reuters.

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But some analysts say the central bank could consider easing its key rate further in view of the surge of coronavirus cases in the past two months, which more than tripled the cumulative total to over 32,000 cases from before the start of a third wave in September.

A recent challenge for Mr Muhyiddin's post by opposition leader Anwar Ibrahim has "increased political noise", adding to "downside risks to growth", according to research note by Standard Chartered.

BNM, which is scheduled to announce the country's third quarter growth performance on Nov 13, had forecast the economy to contract 3.5-5.5 per cent this year. Malaysia economy shrank 17.1 per cent in the April-June period, its first contraction since the 2009 global financial crisis.

The government has so far announced RM305 billion (S$100.3 billion) worth of stimulus measures to help boost the country's coronavirus-ravaged economy.

REUTERS