Wednesday, Malaysia's central bank kept its key interest rate unchanged at 2% after cutting the rate in the previous three consecutive rate-setting sessions. Economists had expected the bank to lower the rate by another 25 basis points to 1.75%.
The Malaysian economy is expected to record a marked contraction in the first quarter of 2009 driven by sharp declines in exports and industrial production, the Bank Negara Malaysia said in a statement accompanying the monetary policy decision.
The central bank said the current economic conditions are expected to prevail until the second quarter of the year, although there are some indications that the pace of decline in economic activity has moderated.
The bank expects the domestic economy to improve in the second half of 2009, supported by stabilization in global economic conditions and the larger impetus from the implementation of the fiscal stimulus measures.
Malaysia's inflation decelerated to 3.5% in March, and is expected to moderate further amid subdued demand conditions and lower external price pressures, the central bank said.
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