'Malaysia may lower rates if global economy worsens'

BANK Negara Malaysia has scope to lower interest rates if the global economy worsens, governor Tan Sri Dr Zeti Akhtar Aziz said."Right now, interest rates are seen at the appropriate level," Zeti told reporters in Basel, Switzerland yesterday.

"But given that our interest rate is at 2 per cent, if conditions in the external environment were to deteriorate from the present conditions, then we do have the flexibility."Malaysia's economy contracted for the first time since 2001 last quarter as exports slumped, pushing the nation towards its first recession in a decade.

Still, the central bank has kept its key interest rate unchanged for the last two meetings, saying previous cuts and government stimulus measures will contribute to a recovery later this year."We said there would be an improvement in conditions, with increased prospects now for positive growth in the fourth quarter," Zeti said.

The country isn't yet ready to float the ringgit, she said."The developments of the financial markets in our region haven't reached that stage, certainly not for Malaysia," she said. "We are still developing our foreign exchange market and we need to see all the pre-conditions in place before internationalisation of our currency." - Bloomberg