Malaysia: Central Bank holds rate steady at 3.25%
March 5, 2015
At its 5 March monetary policy meeting, the Central Bank decided to leave the Overnight Policy Rate (OPR) unchanged at 3.25%. The decision was in line with market expectations.
Bank Negara Malaysia stated that global economic growth continues to expand at a moderate pace in spite of varying performance across countries. Downside risks to growth will likely emerge from the weakening of major economies such as China and Japan. On the domestic front, Malaysia’s economic growth continues to be supported mainly by domestic demand, while exports moderated in the last quarter of 2014. The Bank pointed out that, “going forward, domestic demand will remain as a key driver of growth. While the introduction of the Goods and Services Tax and the lower earnings in the commodity sector are expected to have some impact on private consumption, household spending will continue to be supported by the steady increase in income and employment.”
Consumer prices declined further in January and the Central Bank recognized that inflation will likely remain low in the first quarter of the year. The Bank stated that inflation is likely to trend higher in the subsequent quarters as, “lower fuel prices will partially offset other domestic cost factors.” However, prices are expected to remain below their historical average throughout the year.
Finally, the Bank remarked that, “the current stance of monetary policy remains accommodative and is assessed to be appropriate given the developments in monetary and financial conditions.” The Bank signaled that it would remain vigilant regarding external and domestic developments to ensure that its monetary policy stance is consistent with any changes in the economy’s growth outlook.
Author: Cecilia Simkievich, Economist