KUALA LUMPUR (REUTERS) - Malaysia's central bank left its key interest rate unchanged on Friday (May 12) as expected, as it sees growth strengthening and the economy in better shape after a difficult 2016.

All 10 economists polled by Reuters had forecast that Bank Negara Malaysia (BNM) would hold its overnight rate at 3.00 per cent.

"For Malaysia, the growth momentum since the second half of 2016 is expected to strengthen in the first quarter of 2017, and to be sustained for the rest of the year," the central bank said in a statement.

BNM said growth will mainly be driven by domestic demand amid continued wage and employment gains, and the implementation of new and on-going investment projects.

Headline inflation increased to 4.3 per cent in the first quarter of the year, it said In July, BNM cut its key rate by 25 basis points, the first easing in over seven years.