Bank Negara Malaysia (BNM), at its Monetary Policy Committee (MPC) meeting today, has decided to maintain the Overnight Policy Rate (OPR) at 3.25 per cent.
In a statement today, the central bank said, while the global economy continued to expand, the recovery in the advanced economies has not been as strong as expected earlier and the growth in the emerging economies has slowed.
BNM said the MPC recognised there were heightened financial market volatility and uncertainties also posed additional downside risks to global growth.
"These risks are being closely monitored to assess their implications on macroeconomic stability and the prospects of the Malaysian economy.
"This is to ensure that the monetary policy stance is consistent with the sustainability of the overall growth prospects," it said.
The central bank said for Malaysia, growth remained driven by domestic demand.
While private consumption has moderated as households adjusted to the higher cost of living, household spending was being supported by continued growth in income and employment, it said.
"Overall investment has benefitted from the implementation of infrastructure development projects and capital spending in the manufacturing and services sectors despite the lower investment in the oil and gas sector," it said.
Going forward, BNM said, while recent trends suggested a turnaround in exports, the contribution of the external sector to overall growth was expected to be modest.
"In this challenging environment, the economy is expected to experience more moderate growth in 2016, after expanding by about five per cent in 2015.
"Downside risks to growth have increased following greater uncertainty on both the global and domestic fronts," it said.
The central bank said in confronting more difficult environment, the Malaysian economy will benefit from having diversified sources of growth, economic flexibility, low unemployment, manageable level of external debt, a well-capitalised banking system and developed capital markets that provided
continued access to financing.
It said headline inflation averaged 2.1 per cent in 2015 and was expected to be higher in 2016, given recent adjustments in administrative prices and the weaker ringgit exchange rate.
"The impact of these domestic cost factors on overall inflation is, however, expected to be mitigated by the continued low energy, commodity prices and the generally subdued global inflation.
"In terms of trajectory, headline inflation is anticipated to peak in the first quarter of 2016 and to moderate thereafter," it said.
BNM said the recent external and domestic developments had continued to affect the ringgit exchange rate and domestic financial markets.
"The net external outflows have also led to a moderation in domestic liquidity.
"BNM’s monetary operations have ensured that there is sufficient liquidity to support the orderly functioning of the money and foreign exchange markets," it said.
The central bank said the financial system remained sound with financial institutions operating with ample liquidity buffers.
Consequently, the growth of financing to the private sector continued to be healthy, it said.
In a statement today, the central bank said, while the global economy continued to expand, the recovery in the advanced economies has not been as strong as expected earlier and the growth in the emerging economies has slowed.
BNM said the MPC recognised there were heightened financial market volatility and uncertainties also posed additional downside risks to global growth.
"These risks are being closely monitored to assess their implications on macroeconomic stability and the prospects of the Malaysian economy.
"This is to ensure that the monetary policy stance is consistent with the sustainability of the overall growth prospects," it said.
The central bank said for Malaysia, growth remained driven by domestic demand.
While private consumption has moderated as households adjusted to the higher cost of living, household spending was being supported by continued growth in income and employment, it said.
"Overall investment has benefitted from the implementation of infrastructure development projects and capital spending in the manufacturing and services sectors despite the lower investment in the oil and gas sector," it said.
Going forward, BNM said, while recent trends suggested a turnaround in exports, the contribution of the external sector to overall growth was expected to be modest.
"In this challenging environment, the economy is expected to experience more moderate growth in 2016, after expanding by about five per cent in 2015.
"Downside risks to growth have increased following greater uncertainty on both the global and domestic fronts," it said.
The central bank said in confronting more difficult environment, the Malaysian economy will benefit from having diversified sources of growth, economic flexibility, low unemployment, manageable level of external debt, a well-capitalised banking system and developed capital markets that provided
continued access to financing.
It said headline inflation averaged 2.1 per cent in 2015 and was expected to be higher in 2016, given recent adjustments in administrative prices and the weaker ringgit exchange rate.
"The impact of these domestic cost factors on overall inflation is, however, expected to be mitigated by the continued low energy, commodity prices and the generally subdued global inflation.
"In terms of trajectory, headline inflation is anticipated to peak in the first quarter of 2016 and to moderate thereafter," it said.
BNM said the recent external and domestic developments had continued to affect the ringgit exchange rate and domestic financial markets.
"The net external outflows have also led to a moderation in domestic liquidity.
"BNM’s monetary operations have ensured that there is sufficient liquidity to support the orderly functioning of the money and foreign exchange markets," it said.
The central bank said the financial system remained sound with financial institutions operating with ample liquidity buffers.
Consequently, the growth of financing to the private sector continued to be healthy, it said.
