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

By Angela McDaniels

Tacoma, Wash., Jan. 21 – The Monetary Policy Committee of Bank Negara Malaysia, Malaysia’s central bank, announced that it decided to keep the overnight policy rate at 3¼%.

According to a bank statement, growth in Malaysia remains driven by domestic demand. While private consumption has moderated as households adjust to a higher cost of living, household spending is being supported by continued growth in income and employment. Overall investment has benefited from the implementation of infrastructure development projects and capital spending in the manufacturing and services sectors despite the lower investment in the oil and gas sector, the committee said.

Going forward, the committee expects the contribution of the external sector to overall growth to be modest and the Malaysian economy to experience more moderate growth in 2016 after expanding by about 5% in 2015. The committee said downside risks to growth have increased following greater uncertainty on both the global and domestic fronts.

Headline inflation averaged 2.1% in 2015. The committee expects it to be higher in 2016 given recent adjustments in administrative prices and the weaker ringgit exchange rate. However, it expects the impact of these domestic cost factors on overall inflation to be mitigated by the continued low energy and commodity prices and the generally subdued global inflation.

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