Malaysia: Central Bank maintains rate in October
November 6, 2014
At its 6 November 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. Economic growth in Asia is being driven by improvements in the external sector as well as strengthening domestic demand. However, economic activity in several major economies is weakening and financial market volatility has risen. Despite the impact of slower global growth on export performance, the Bank expects the Malaysian economy to, “remain on a steady growth path.” The Bank expects domestic demand to remain the key driver of growth going forward. Private consumption is expected to moderate, while the Bank sees investment spending remaining robust.
Regarding price developments, the Central Bank recognized that inflation will likely trend higher for the remainder of the year due to domestic cost factors. Nonetheless, the absence of external price pressures and moderating domestic demand will mitigate the impact.
With fairly stable growth prospects and higher but contained inflationary pressures, the Bank decided to maintain the current OPR. 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 to ensure that its monetary policy stance is consistent with any changes to the growth outlook of the economy.