Malaysia c.bank holds rates at 2 pct as forecast

* Malaysia central bank holds key rate <MYINTR=ECI> at 2 pct, as expected

* Says economy stabilising, recovery from H2 2009

* Says deflation "temporary" and price pressures "benign"

KUALA LUMPUR, Aug 25 - Malaysia's central bank kept interest rates on hold at 2.00 percent for its fourth consecutive policy meeting on Wednesday, in line with expectations in a Reuters poll. [ID:nSP533062]

The central bank said in a statement with the rate decision that it sees economic conditions are stabilising due to recent financial and economic indicators.

It said recent deflation was a temporary effect due to falling fuel prices and easing pressure on food prices.

"With improving domestic economic conditions and as price pressures are expected to remain benign going forward, the assessment is that the current monetary stance is appropriate and will continue to provide support for economic activity," the central bank said.

CHRONOLOGY OF RATE MOVES

Date Action (bps) To (OPR, pct)

------------------------------------------------------

Aug 25, 2009 no change 2.00

July 29, 2009 no change 2.00

May 26, 2009 no change 2.00

Apr 29, 2009 no change 2.00

Feb 24, 2009 Down 50 2.00

Jan 21, 2009 Down 75 2.50

Nov 24, 2008 Down 25 3.25

Apr 26, 2006 Up 25 3.50

Feb 22, 2006 Up 25 3.25

Nov 30, 2005 Up 30 3.00

CONTEXT:

- The central bank has cut the benchmark OPR by a total of 150 basis points since November in an attempt to reduce the impact of the global downturn on the local economy. Despite the rate cuts and government stimulus programmes, the economy is still expected to shrink by up to 5 percent this year, the worst since 1998 when the country was hit by the Asian financial crisis.

- Inflation is not a worry as consumer prices turned negative for two consecutive months from a year earlier while fiscal stimulus is only expected to make a visible impact in the fourth quarter.