Bank Negara Malaysia (BNM) held its overnight policy rate (OPR) at 1.75% at its final scheduled meeting of the year, as expected by 17 of 22 economists surveyed by Bloomberg. The rest forecast a 25-basis point cut.

It’s the second straight meeting that the central bank has held, after lowering its benchmark rate by 125 basis points from January to July.

The economy began to show signs of recovery at the end of the second quarter (2Q), when it contracted by the most in more than two decades.

The “latest indicators point towards significant improvement in economic activity in the third quarter,” BNM said in a statement announcing the decision.

While current policy is “appropriate and accommodative,” the bank said it “remains committed to utilise its policy levers as appropriate to create enabling conditions for a sustainable economic recovery.”

Malaysia’s 2Q gross domestic product contracted by the most since the Asian financial crisis in 1997.

Now, a new wave of infections that emerged in late September risks stunting Malaysia’s recovery again.

The Sabah state election that month fueled a nationwide resurgence of the virus, leading to renewed restrictions on movement across several states. Efforts to contain the pandemic may hurt economic performance in October and November, Minister in the Prime Minister’s Department (Economic Affairs) Mustapa Mohamed said yesterday.

The political uncertainty has weighed on the nation’s financial markets.

In October, Malaysia’s ringgit lagged most Asian peers, which strengthened on the back of a weak dollar.

Global funds pulled a net US$161 million (RM670 million) from local shares last month, with the benchmark equity index capping its third straight month of losses.