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Bloomberg TV 28/10/08

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Malaysia's central bank pledged it will take action to prevent the economy from deteriorating after keeping the benchmark interest rate unchanged for the 20th straight meeting.

``In the face of diminishing inflationary pressures, and in the event of heightened downside risks to growth, the bank will take swift monetary policy action to provide support to the economy,'' Bank Negara Malaysia said yesterday, after maintaining the overnight policy rate at 3.5 percent.

The decision contrasts with cuts by central banks in China, India and Australia, which have lowered borrowing costs in recent weeks to spur growth amid a looming global recession. Malaysia's inflation has started to ease from a 26-year high and that may give the central bank room to reduce interest rates should the economy slump.

``Bank Negara will look to ease policy, possibly as soon as the next meeting, especially if the growth risks become clearer and inflation risks diminish,'' said Mark Tan, an economist at Goldman Sachs Group Inc. in Hong Kong. ``The main factor that will influence future rate decisions would be how fast they expect the growth outlook to unravel.''

Earlier this year, the central bank had held off from raising rates to cool inflation as challenges to Prime Minister Abdullah Ahmad Badawi's leadership threatened to hurt consumer confidence and economic growth. Opposition Leader Anwar Ibrahim, who had said he wanted to topple the government by September, said this week that goal is now harder to achieve.


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