Malaysia: Central Bank maintains rates in January
January 29, 2014
At its 29 January monetary policy meeting, the Central Bank left the Overnight Policy Rate (OPR) unchanged at 3.00%, a decision that was consistent with market expectations. The Bank has kept its policy rate at the current level since May 2011.
Bank Negara Malaysia stated that, in the major economies, "broader signs of improvement have emerged." The Bank expects that the economic performance that was sustained in Q4 2013 will carry into 2014. A strong external sector along with robust investment activity are seen as the main drivers of this momentum. However, given the consolidation in the public sector and a slowdown in consumption, domestic demand is expected to moderate going forward.
Regarding price developments, the Central Bank stated that inflation rose to 3.2% in December and to 2.1% in 2013 for the year as a whole. The Bank explained that inflation has been rising due to supply disruptions that were caused by adverse weather conditions and high domestic cost factors. Nonetheless, it added that, going forward, "the subdued external price pressures and moderate domestic demand conditions will help contain the impact of these cost factors on underlying inflation."
For 2014, panelists expect the monetary policy rate to end the year at 3.26%. For 2015, the panel expects the policy rate to end the year at 3.41%.
Author: Carl Kelly, Economist