Calling the move “understandable”, “reasonable” and “quite guarded”, they say the central bank has kept the door open for further rate cuts depending on new data and information in view of the Covid-19 pandemic.

BNM maintained the OPR status quo at its first Monetary Policy Committee meeting of the year today, despite expectations that it would cut the rate to a new record low of 1.50%.

Sunway University economics professor Yeah Kim Leng said that the decision may mean the central bank is uncertain whether the second round of the movement control order (MCO 2.0) will derail this year’s projected growth trajectory.

“The hold decision is an affirmation of the central bank’s view that the current interest rate level is sufficiently low to support the economic recovery.

“It’s a prudent decision to keep some ‘dry powder’ given the already low interest rate level and release of the latest fiscal assistance package,” said Yeah, who is a former external member of BNM’s Monetary Policy Committee.

However, Socio-Economic Research Centre executive director Lee Heng Guie said that today’s decision underscores BNM’s confidence that MCO 2.0 is not likely to significantly derail this year’s projected growth.

While he said BNM expects the short-term dent on growth to improve from the second quarter onwards, Lee stressed that the economy is not “completely out of the woods yet”.

“Recovery strength depends on the virus development and vaccination programme.

“If we can cross the hurdle in the first quarter, there will be no need for a rate cut in the months ahead,” he added.

Bank Islam Malaysia Bhd’s chief economist Mohd Afzanizam Abdul Rashid, however, did not rule out the possibility of a 25 basis points reduction being done in the future as he said the present situation is “highly fluid”.

He also called BNM “quite guarded” in today’s assessment, particularly with regard to the downside risks surrounding the economy such as Covid-19 infections and the vaccine roll-out.

Highlighting the difficulties in forecasting the uncertain global economy and domestic outlook under the current conditions, Malaysia University of Science and Technology economist Geoffrey Williams said BNM’s decision was reasonable.

“In the absence of clear forecast scenarios, it looks like they’ve opted to do nothing,” he said.

“This is reasonable, but I think the economy still needs some monetary policy support to bolster the fiscal injections announced by the prime minister earlier this week.

“With negative headline inflation and low core inflation, there is room for monetary support,” Williams added.

However, Goh Lim Thye, a senior economics lecturer at Universiti Malaya who called today’s decision “understandable”, warned that while reducing the interest rate may stimulate spending, keeping it too low may also lead to overborrowing, thus increasing household debt levels.

Meanwhile, research house CGS-CIMB noted that BNM’s decision was in line with their expectations but said it expected an OPR cut in the first half of 2021.

Noting the health ministry’s warning that daily Covid-19 infection rates could reach 8,000 by the third week of March, CGS-CIMB analysts Michelle Chia and Lim Yee Ping said BNM may be pressed into easing monetary policy further should the country’s growth outlook continue to falter.

“As such, we foresee BNM reducing the OPR by 25 basis points in the first half of the year, at either the March or May meetings, and adjust our end 2021 OPR forecast to 1.50%,” they said in a note.