KUALA LUMPUR: Malaysia's central bank on Friday kept its benchmark interest rate unchanged at 3.25 percent, as widely expected with the ringgit continuing to slide and the global economic outlook remaining uncertain.
Bank Negara Malaysia (BNM) said the benchmark rate remains "supportive" of the economy, which it said faces growing risks to growth "amid greater uncertainty on both the global and domestic fronts".
But it said enters a challenging period "from a position of strength", and economic growth can remain in the region of 4.5-5.5 percent a year. Economists say BNM had to hold the benchmark rate unchanged, for fear a rate cut would further undermine the ringgit and lead to more capital outflows.
All 13 economists in a Reuters poll said BNM would hold the rate.
"The ringgit will persist in remaining weak, so the rate will not be adjusted to boost the ringgit as our central bank isn't an exchange rate targeting one," said Patricia Oh, economist at AmInvestment Bank Group.
Malaysia has recently reported some better than expected economic data.
Exports rose more than anticipated in July while foreign-exchange reserves increased in late August, but this hasn't helped the ringgit, the worst performing Asian currency this year.
The ringgit strengthened on Friday, in response to a stronger yuan, but it shed about 1.4 percent this week, taking its loss for the year to 19 percent against the US dollar.
PRESSURE ON THE RINGGIT
Hurting the ringgit have been low commodity prices and concern that the US Federal Reserve will raise interest rates. Another factor is a pressure on Prime Minister Najib Razak stemming from a media report about a large transfer from overseas into a personal bank account.
Malaysia's anti-corruption agency has said the money was a "donation" and Najib has denied any wrongdoing.
Southeast Asia's third largest economy grew at an annual rate of 4.9 percent in the second quarter, easing from 5.6 percent in the first quarter.
Most economists expect the economy to slow further in the second half.
At a meeting in the Philippines on Friday, Malaysian Deputy Finance Minister Datuk Johari Abdul Ghani said that if the ringgit and commodity prices do not fall further, the country can have growth of about 5 percent.
Domestic consumption has also cooled after a 6 percent consumption tax was implemented in April.
BNM said headline inflation is expected to peak in early 2016 and then moderate through the year.
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