BNM maintains OPR at 3.25%

Malaysia's central bank is likely to cut its benchmark rate to 3% at a policy review on Tuesday to cope with a slowdown in growth, a slim majority of analysts in a Reuters poll said.

KUALA LUMPUR: The Monetary Policy Committee of Bank Negara Malaysia has maintained the overnight policy rate at 3.25% in line with the intended policy stance.

"The MPC will continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation," the central bank said in a statement.

BNM said the economy is expected to remain on a steady growth path in 2018 and 2019 although it faces downside risk from any further escalation in trade tensions and prolonged weakness in the mining and agriculture sectors.

It said average headline inflation will be low in 2018, although it is projected to increase in 2019 due to higher global oil prices and the floating of domestic fuel prices. 

"While the impact of the consumption tax policy will contribute to higher headline inflation in 2019, it will lapse towards the end of 2019. 

"Underlying inflation is expected to remain contained in the absence of strong demand pressures."

According to the central bank, latest indicators suggest that private sector activity continues to expand with private consumption being the main driver of growth. 

Meanwhile, investment activity is projected to be sustained by continued capacity expansion in key sectors.

However, public sector spending is expected to weigh on growth due to the reprioritisation of government spending.

On the external front, exports are projected to provide additional lift to growth, albeit at a lesser extent due to moderating global growth momentum.

BNM said the domestic financial markets continue to see non-resident portfolio outflows due to global developments but remains orderly due to supportive domestic monetary and financial conditions.

It added that the financial sector is sound with financial institutions operating with strong capital and liquidity buffers.