KUALA LUMPUR: Bank Negara’s Monetary Policy Committee (MPC) has maintained the benchmark overnight policy rate (OPR) at 3% as the current stance of monetary policy is accommodative.
The central bank’s call to retain the OPR was made during its meeting today based on several ongoing positive factors in the local and global fronts.
“At the current level of the OPR, the stance of monetary policy remains accommodative. Given the strength of the global and domestic macroeconomic conditions, the MPC may consider reviewing the current degree of monetary accommodation. This is to ensure the sustainability of the growth prospects of the Malaysian economy,” it said in a statement.
“For Malaysia, economic growth has become more entrenched. Both the domestic and external sectors continue to register strong performance. Growth momentum has been lifted by stronger spillovers from the external sector to the domestic economy as firms invest in productive capacity, raise wages and hire more workers,” Bank Negara said.
For 2018, domestic demand is expected to remain the key source of growth. Private consumption will remain the largest driver of growth, supported by continued improvements in income and overall labour market conditions.
It added that Investment will be sustained by infrastructure projects and higher capital investment in the manufacturing and services sectors while the external sector would provide additional impetus to the economy.
Overall, Bank Negara said the assessment was for growth to remain strong in 2018.
Domestic inflation has been driven mostly by movements in global oil prices. Consequently, headline inflation increased to 4.3% in September, arising from higher global prices of refined oil caused by disruptions in the global supply.
“For 2017 as a whole, headline inflation is expected to be at the upper end of the forecast range. Moving into 2018, headline inflation is projected to moderate on expectations of a smaller effect from global cost factors,” Bank Negara said.
Nevertheless, the trend of headline inflation will be dependent on future global oil prices which remain highly uncertain. Underlying inflation, as measured by core inflation, will be sustained by robust domestic demand.
Bank Negara said the domestic financial markets have been resilient and the ringgit had strengthened to better reflect the economic fundamentals. Additionally, it said banking system liquidity remained sufficient with financial institutions continuing to operate with strong capital and liquidity buffers.
The growth of financing to the private sector has been sustained and is supportive of economic activity.