Price Conditions: Headline inflation, as measured by the annual
percentage change in the Consumer Price Index (CPI) moderated to 1.6% in June,
due to lower inflation in the transport
and food and non-alcoholic beverages
categories. Inflation in the transport category
declined as the price of RON97 petrol was revised downward in June 2012. The food and non-alcoholic beverages
category also registered a lower inflation rate of 2.9% during the month
following smaller increase in prices in the food
away from home sub-category.
Monetary Conditions: Interbank rates were stable in June. In terms of
retail lending rates, the average base lending rate (BLR) of commercial banks
remained unchanged at 6.53% as at end of the month. Retail deposit rates were
also relatively stable during the period. The annual growth in broad money (M3)
moderated to 12.8% in June. On a monthly basis, M3 increased, reflecting mainly
higher credit extended to the private sector. The expansion in M3, however, was
partially mitigated by net foreign outflows and Government fundraising
activities during the month. Net financing to the private sector expanded
by RM26.5 billion in June, due to higher net issuances of private
debt securities (PDS) and an increase in outstanding banking system loans.
There was continued expansion in banking system loans to businesses, mainly to
the finance, insurance and business services;
manufacturing; agriculture and
wholesale and retail, restaurants and hotels sectors. Loans to
households also expanded during the month, driven mainly by loans for the purchase
of securities, residential property
and passenger cars. Loan demand remained high with sustained 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 12.9% respectively. The level of net impaired loans
improved, amounting to 1.5% of net loans due to recovery and write-off exercise
by some banks as part of the balance sheet strengthening exercise. Loan loss coverage remained high at 98.9%.
Exchange Rates and International
Reserves: In June, the
ringgit depreciated against most of the currencies of Malaysia’s major trading
partners. The ringgit ended the month slightly weaker against the US dollar as
international investors’ unwound holdings of emerging market assets following
concerns over the outlook for global economic growth and renewed uncertainties
over the European sovereign debt crisis. The ringgit also depreciated against
the euro, Singapore dollar and Chinese renminbi, while recording a modest
appreciation against the Japanese yen. In July, the ringgit along with most
other currencies appreciated against the US dollar as expectations for monetary
easing in the advanced economies renewed investor interest for emerging market
assets. The international reserves of Bank Negara Malaysia stood at RM429.4
billion (equivalent to USD134.4 billion) as at 13 July 2012, sufficient to
finance 9.4 months of retained imports and are 4.3 times the short-term
external debt.
Source: Bank Negara Malaysia
