Bank Negara "decided to leave the overnight policy rate unchanged at three percent," it said in a statement after the first meeting of its monetary policy committee for 2006.

Concerns have been lingering that interest rates may rise again to curb inflation after the central bank raised rates in November for the first time in seven years.

Despite leaving the rate unchanged, the central bank said inflation could still rise and that it would continue to monitor the situation.

"Malaysia's economic growth is expected to gain momentum in 2006, with the risk of inflation still remaining," it said.

Inflation rose 3.0 percent for all of 2005, peaking at a six-year high of 3.7 percent in August, compared with a 1.4 percent increase for 2004.