Malaysia Monetary Policy


Central Bank leaves rates unchanged but raises reserve requirements

At its 7 July monetary policy meeting, the Central Bank maintained the overnight policy rate (OPR) unchanged at 3.00%, in a decision that surprised most market analysts, who had seen a 25 basis-point hike as inflation had climbed to a two-year high in May. Nevertheless, the Central Bank cited an evident moderation in growth, mainly due to heightened uncertainties arising from the sluggish global economic recovery and lower-than-expected public sector investment, as the main reason behind its decision. In a related move, the Central Bank lifted the statutory reserve requirement ratio from 3.00% to 4.00%, the third increase so far this year. The decision was undertaken as a pre-emptive measure to manage the significant build-up of liquidity, which may result in financial imbalances and create risks to financial stability. The Central Bank will hold its next monetary policy meeting on 8 September.

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