01/02/2012 (AFP) - Malaysia's central bank left its key interest rate unchanged on Tuesday, citing a need to remain cautious amid lingering concern over a "challenging" global economic situation.

Bank Negara said its monetary policy committee decided to hold the Overnight Policy Rate (OPR) at 3.0 percent, citing a "deteriorating" world economic and financial situation led by concern over the European sovereign debt crisis.

"In Asia, while growth continues to be supported by sustained domestic demand, the growth momentum has moderated amid the weaker external environment," the bank said in a statement.

However, it said it expected to announce continued economic expansion in the fourth quarter of 2011 when it releases growth figures on February 15.

It said growth was "driven by sustained domestic consumption and investment activities" that helped to counter the external difficulties.

"Overall growth prospects, however, would be affected by the slowdown in external demand, resulting in slower growth in exports and industrial production," it warned.

The economy grew 5.8 percent in the third quarter.

Malaysia's economy depends heavily on exports of key commodities such as palm oil, rubber, and energy products as well as electronics and other manufactured goods.

The bank expects inflation -- which has hovered just above 3 percent in recent months -- to be manageable in 2012 due to slowing global economic activity.

The monetary policy committee, which meets on rates every two months, has held borrowing costs firm since May, when it hiked the rate for the first time in 10 months to rein in inflation.