Malaysia's central bank again keeps overnight interest rate at 3%

By Toni Weeks

San Luis Obispo, Calif., Jan. 31 - The Monetary Policy Committee of Bank Negara Malaysia, Malaysia's central bank, announced that it has decided to keep its overnight policy rate unchanged at 3%.

The committee said the global economy is showing signs of improvement, although at an uneven pace. Growth in advanced economies is still limited by ongoing fiscal consolidation and weak labor market conditions, but growth in Asia is supported by sustained domestic demand and a gradual recovery in external demand. In addition, stress in the international financial markets is abating. Despite these improvements, there are still downside risks to the prospects for global growth, the bank said.

In the Malaysian economy, indicators suggest robust expansion in fourth-quarter 2012. Growth was driven by sustained domestic consumption and investment activity. Domestic demand is expected to continue expanding, the report said. In addition, private consumption will be supported by income growth and stable employment, while investment will be led by capital spending in domestic-oriented sectors, the oil and gas industry and ongoing infrastructure projects.

Domestic headline inflation averaged 1.6% in 2012 and is expected to be higher, but to remain modest, in 2013. Some global food prices and domestic factors are expected to increase costs, contributing to higher prices Given modest global growth prospects, however, pressures from global commodity prices is expected to be contained.

The bank said its current monetary policy is supportive of the economy, and inflation remains contained. The MPC will continue to carefully assess global economic and financial developments and their effects on the overall outlook for inflation and growth of the Malaysian economy.

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