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Malaysia kept its benchmark interest rate at a record low Thursday as a fresh surge in coronavirus infections threatens to further delay an economic recovery.

Bank Negara Malaysia held the overnight policy rate at 1.75% for a fifth straight meeting, a decision expected by all 21 economists in a Bloomberg survey.

“Latest indicators point to continued improvements in economic activity in the first quarter and into April,” the central bank said in a statement Thursday. “While the recent re-imposition of containment measures in select locations will affect economic activity in the short term, the impact will be less severe as almost all economic sectors are allowed to operate.”

Still, the statement noted that “the balance of risks to the growth outlook remains tilted to the downside,” due to uncertainty over the course of the pandemic and potential challenges for the country’s vaccine rollout.

The decision comes as Malaysia suspended a domestic travel bubble and tightened movement curbs in Kuala Lumpur and in Selangor, its richest state, to contain a surge in infections that has left some hospitals running low on ICU beds. Daily cases last week topped 3,000 for the first time since February, prompting the Health Ministry to propose a lockdown in the capital as well as several states.

After the decision, the ringgit held earlier losses to trade down 0.1% at 4.1250 per dollar. Stocks pared losses and government bonds were little changed.

Recent Gains

Bank Negara Malaysia “spoke about how the current monetary policy stance remains appropriate, and how the virus curbs are less severe than before,” said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp in Singapore. “From those alone, it does not look like a central bank that is laying the groundwork for any cut in the near term.”

Further containment measures could undo the recent strides made in the economy. The April manufacturing Purchasing Managers Index hit a record high, while March exports registered the strongest year-on-year growth in almost four years. Manufacturing sales rose at their fastest pace in nearly four years in March, while an index of industrial production showed its strongest gains in March since July 2013.

Consumer prices surged to an almost three-year high in March, driven partly by a low base effect from last year, when tight movement restrictions pushed the country into deflation. The central bank expects headline inflation to average 2.5%-4% this year.

“The fact that Bank Negara Malaysia (BNM) left its policy rate on hold at 1.75% today despite the worsening economic outlook means any further loosening is unlikely,” Alex Holmes, Asia economist at Capital Economics Ltd., wrote after the decision. “With the recovery set to be slow and fitful, we think BNM will leave interest rates at their current low until at least the end of 2022.”

— With assistance by Y-Sing Liau, and Chester Yung