Bank Negara Malaysia has decided to maintain its Overnight Policy Rate (OPR) unchanged at 3.25 per cent -- as it remains supportive of economic activities.

It was reported earlier that the OPR was last raised by 0.25 per cent.

In a statement today, the central bank said Malaysian economy is expected to expand at a more moderate pace in 2016 after registering a 5 percent growth in 2015, due to challenging global environment.

Domestic demand remain key driver of growth while private consumption is expected to moderate, household spending will continue to be supported by the growth in income and employment, and the additional disposable income from the measures announced during the 2016 Budget Recalibration.

It said overall investment will continue to be supported by the implementation of infrastructure development projects and capital spending in the manufacturing and services sectors.

The external sector is expected to record a modest improvement and provide additional support to the economy.

Inflation

For 2016, inflation is expected to be higher compared to 2015 given the adjustments in administered prices and the weaker ringgit exchange rate.

The impact of these cost factors is, however, expected to be mitigated by the continued low energy and commodity prices and the generally subdued global inflation.

Consequently, the inflation momentum is expected to be slower than earlier anticipated.

Domestic financial conditions

Overall domestic financial conditions have remained relatively stable since the previous MPC meeting.

BNM's monetary operations continue to ensure that there is sufficient liquidity to support the orderly functioning of the money and foreign exchange markets.

The financial system continues to be sound with financial institutions operating with sufficient liquidity buffers. The growth of financing to the private sector has also remained healthy.

Monetary policy remain accommodative

BNM remains optimistic of the current level of OPR, the stance of monetary policy is accommodative and supportive of economic activity.

The MPC recognises that there are heightened risks in the global economic and financial environment and is closely monitoring and assessing their implications on domestic price stability and growth.

This is to ensure that the monetary policy stance is consistent with sustainable growth of the Malaysian economy.

Global economy

According to BNM, the global economy continues to expand at a moderate pace as in advanced economies, growth is known to be modest and uneven.

In most of Asia, domestic demand continues to support economic activity despite the weaker export performance.

The international financial markets remain volatile amid shifts in global liquidity and investor sentiments.

Looking ahead, while global growth is expected to continue, the outlook is vulnerable to downside risks arising from the prevailing fragility that is both cyclical and structural, excessive leverage, sharp declines in commodity prices and the rising geopolitical risks.