Price Conditions: Headline inflation, as measured by the annual percentage change in the Consumer Price Index (CPI) moderated slightly to 2.1% in March. In terms of components, the lower inflation was driven mainly by slower price increases in the housing, water, electricity, gas and other fuels and transport categories. Inflation in the food and non-alcoholic beverages category was unchanged at 2.9% in March. Food inflation was held down by the continued decline in the prices of meat and vegetables categories arising from an oversupply of chicken as well as higher production and the cheaper imports of vegetables. However, there were other food categories such as fish and seafood, and rice, bread and other cereals, where prices continued to rise, but at a slower pace.
Monetary Conditions: Interbank rates were stable in March. In terms of retail lending rates, the average base lending rate (BLR) of commercial banks remained unchanged at 6.53%. Retail deposit rates were also stable during the month. Broad money expanded at an annual rate of 15.0% in March. During the month, the increase in credit extended by banks to the private sector was partially offset by capital outflows. Net financing to the private sector expanded by RM18.7 billion in March, due to an increase in outstanding banking system loans and higher net issuances of private debt securities (PDS). There was a continued expansion in banking system loans to businesses, mainly to the wholesale and retail, restaurants and hotels; transport, storage and communication and real estate sectors. Loans to households expanded during the month, driven mainly by loans for the purchase of residential property, securities and passenger cars. Loan demand increased significantly with higher loan applications from both businesses and households.
Banking System: The banking system remained well-capitalised with risk-weighted capital ratio (RWCR) and core capital ratio (CCR) at 14.7% and 13% respectively. The level of net impaired loans improved, amounting to 1.7% of net loans due to write-off exercise by a number of banks as part of the balance sheet strengthening exercise. Loan loss coverage was sustained above 90%.
Exchange Rates and International Reserves: In March, the ringgit depreciated against the currencies of Malaysia’s key trading partners. The ringgit’s depreciation followed weaker than expected data releases amongst some advanced and regional economies, which prompted the unwinding of holdings of assets in several of the emerging markets. In April, the ringgit posted a stronger performance against the currencies of Malaysia's major trading partners, with the exception of the Japanese yen and Singapore dollar. The international reserves of Bank Negara Malaysia stood at RM416.6 billion (equivalent to USD135.8 billion) as at 13 April 2012, sufficient to finance 9.5 months of retained imports and is 4 times the short-term external debt.
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