Malaysia's central bank held its benchmark Overnight Policy Rate (OPR) steady at 3.0 percent, as expected, and said that even if inflation is expected to rise this year it is expected to remain modest.
Bank Negara Malaysia (BNM), which has held its policy rate steady since June 2011, said domestic investment activity remains robust and there is continued expansion in private consumption.
"Going forward, this trend is expected to continue," the BNM said, adding that "the external sector is also expected to improve and provide additional support to the economy."
Inflation in January rose to 1.3 percent from 1.2 percent in December and the central bank said higher global prices on some food and commodities, along with domestic factors, are expected to raise costs and contribute to higher prices.
However, modest global growth is expected to contain global commodity prices, it added.
"While inflation is expected to rise during the year, the expectation is for it to remain modest," the central bank said.
Malaysia's Gross Domestic Product rose by 2.9 percent in the fourth quarter from the third for annual growth of 6.4 percent, up from a rate of 5.3 percent in the third quarter. Malaysia's economy is expected to expand by 4.5-5.5 percent in 2013.
The global economy is still confronted by uncertainties and there are still risks to sustained recovery.
"While global financial markets have broadly improved, markets remain vulnerable to setbacks and changes in sentiment," the BNM said.