Malaysia Monetary Policy January 2017

Malaysia

Malaysia: BNM maintains its policy rate unchanged at 3.00% in January

January 20, 2017

Bank Negara Malaysia (BNM) decided to keep the Overnight Policy Rate unchanged at 3.00% at its 23 November monetary policy meeting, as widely expected by market analysts. The statutory reserve requirement (SRR) was also left unchanged at 3.50%.

The decision to hold the Overnight Policy Rate unchanged suggests that the Central Bank is more worried about supporting the ringgit than boosting Malaysia’s sluggish economy. The ringgit is Asia’s worst-performing currency since Trump’s surprising victory in the U.S. presidential elections—it has fallen more than 5% since then. Regarding the ringgit, the Bank stated in its press release that it will continue to provide liquidity to ensure the orderly functioning of the foreign exchange market.

In terms of the domestic economy, Bank Negara considers that private consumption will continue to be the key driver of growth, as the government is expected to implement measures to boost disposable income. Meanwhile, export growth should remain subdued given the lackluster demand from Malaysia’s key trading partners and, overall, monetary authorities estimate the economy to grow within expectations in 2016, and to continue on a steady growth path next year.

Bank Negara concluded its press release by stating that, “the degree of monetary accommodativeness is consistent with the policy stance to ensure that the domestic economy continues on a steady growth path amid stable inflation, supported by continued healthy financial intermediation in the economy.” Meanwhile, the Bank projects inflation to be at the lower end of the projected range of 2.0%-2.5% and it expects it to stay relatively stable in 2017, given low global energy prices and generally low global inflation.

The panel of economic analysts we surveyed for this month’s Consensus Forecast expect the monetary policy rate to end this year at 2.90%. Our panel expects the policy rate to remain virtually unchanged at 2.89% by the end of 2017.


Author:, Economist

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Malaysia Monetary Policy January 2017 0

Note: Overnight Policy Rate in %.
Source: Bank Negara Malaysia (BNM).


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