Malaysia’s central bank keeps overnight policy rate unchanged at 3¼%

By Tali Rackner

Norfolk, Va., Sept. 11 – The Monetary Policy Committee of Bank Negara Malaysia, Malaysia’s central bank, announced that it decided to keep the overnight policy rate at 3¼%. The rate was last raised by 25 basis points in July 2014.

According to a bank statement, the global economy continues to expand at a moderate pace. While growth across the advanced economies has improved, it has remained modest. In most of Asia, while there has been a moderation in growth, domestic demand continues to support economic activity.

Looking ahead, while the global economic recovery is expected to continue, the downside risks to growth have increased arising from the moderating growth momentum in the major emerging market economies, uncertainty in commodity prices and the heightened volatility in financial markets, the committee said.

For Malaysia, the latest indicators point to continued expansion in economic activity in the third quarter despite ongoing adjustments to external and domestic developments.

The committee said investment activity is expected to be led by capital spending in the manufacturing and services sectors and ongoing infrastructure projects. The continued expansion in domestic demand is expected to contribute toward mitigating the weak performance of the external sector. Going forward, downside risks to growth, however, have risen amid greater uncertainty on both the global and domestic fronts.

Headline inflation averaged 2.9% in June and July, reflecting higher domestic fuel prices and the impact of the goods and services tax. The committee expects it to peak in early 2016 and moderate for the remainder of the year.

In addition, while recent global and domestic developments have affected the ringgit exchange rate and domestic financial markets, overall domestic liquidity conditions remain stable. In the committee’s opinion, the financial system remains sound, with healthy growth in financing.

The committee said it will continue to monitor and assess the impact of heightened risks to global growth and financial conditions on macroeconomic stability and the prospects of the Malaysian economy.

© 2015 Prospect News.
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