Monetary Policy Statement

At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 3.00 percent.

The pace of the global recovery has moderated in the recent months.  The latest data pointed to slower economic activity and more challenging growth prospects in several regions around the world.  Although pressures in the international financial markets have receded following the recent policy announcements to address the European crisis, a number of important policy issues remain unresolved and continue to unsettle financial markets.  Economic activity in several of the advanced economies continues to be affected by ongoing fiscal consolidation, impaired financial intermediation and weak labour market conditions.  In emerging economies, while domestic demand remains an important source of growth, exports are affected by weak external demand. 

In the domestic economy, recent data and surveys of business conditions suggest that consumption and investment activity remains resilient. Looking ahead, domestic demand will continue to be the anchor of growth. Household spending continues to be supported by stable employment conditions and income growth. The strong investment activity is mainly led by the domestic-oriented industries, the oil and gas sector and the steady progress in the construction of infrastructure projects.

Headline inflation is expected to remain moderate for the remainder of 2012. With some excess capacity in the economy, the strength of domestic demand is not expected to result in inflationary conditions.  Global energy and commodity prices are likely to be contained given the weak global conditions.  However, upside risks to inflation could emerge should disruptions to global supply result in higher global prices for these commodities.

In the MPC’s assessment, there continues to be considerable uncertainties in the global economic and financial environment. The MPC will continue to carefully assess these evolving conditions and their implications on the overall outlook for inflation and growth of the Malaysian economy.

Source: Bank Negara Malaysia