Bank Negara is maintaining the overnight policy rate (OPR) or benchmark policy rate at 3%, as domestic demand continues to support the country’s economic growth amid continued moderation in external demand.
The central bank has maintained the OPR at 3% since May 2011. It releases monetary policy statements every two months on the OPR.
It said in a press statement following a meeting of the monetary policy committee (MPC) that private consumption remained steady, underpinned by income growth and stable labour market conditions.
“Capital spending in the domestic-oriented industries and the ongoing implementation of infrastructure projects would also support investment activity,” it said.
Meanwhile, inflation remained low at 1.6% in the first five months of the year. Although it is projected to increase in the second half of the year due to domestic supply and cost factors, Bank Negara expects it to remain at a modest rate.
“Pressures from global commodity prices are also likely to be contained, given the moderate global growth prospects,” it said on Thursday.
The MPC justified its current stance on monetary policy, given the outlook for inflation and growth. The committee said it would continue to assess global economic and financial developments and their implications on Malaysia’s inflation and growth outlook.
Globally, macroeconomic watchers have signalled a possible global tightening of credit, with the US having indicated a phasing out of quantitative easing, while Brazil’s central bank recently raised the benchmark interest rate a third consecutive time.