Malaysia: Central Bank maintains overnight rate at 3.25%
January 28, 2015
At its 28 January 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. Despite varying performance across countries, the monetary authority pointed out that the global economy is expected to benefit from lower oil prices going forward. However, there are downside risks to growth due to the weakening of major economies such as China and Japan. On the domestic front, Malaysia’s economic growth continues to be mainly supported by domestic demand amid moderating exports in the last quarter of 2014.
Regarding price developments, the Central Bank recognized that inflation will likely trend lower than previously estimated due to lower energy and commodity prices. Nonetheless, headline inflation is expected to remain relatively stable since, as pointed out by the Committee, “the projected lower energy prices will partially offset other domestic cost factors,” following November’s reduction in fuel subsidies.
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 will remain vigilant of external developments to ensure that its monetary policy stance is consistent with any changes in the economy’s growth outlook.
Author: Cecilia Simkievich, Economist