UALA LUMPUR: Bank Negara Malaysia's Monetary Policy Committee (MPC) maintained the Overnight Policy Rate (OPR) at 3.25% and expected the inflation rate to be stable this year.
It said on Tuesday headline inflation in January 2019 was at -0.7%, due mainly to negative transport inflation at -7.8% arising from lower global oil prices.
Bank Negara said the underlying inflation, as measured by core inflation remained stable at 1.5% in January 2019 reflecting sustained demand conditions.
“In the immediate term, inflation is expected to remain low mainly due to policy measures. These include the lower price ceiling on domestic retail fuel prices until mid-2019 and the impact of the changes in consumption tax policy on headline inflation.
“For 2019 as a whole, average headline inflation is expected to be broadly stable compared to 2018,” it said.
Bank Negara also said the trajectory of headline inflation would continue to hinge on global oil prices.
“Underlying inflation is expected to be sustained, supported by the steady expansion in economic activity and in the absence of strong demand pressures,” it said.
On the external economic outlook, Bank Negara was concerned about unresolved trade tensions which was affecting global trade and investment activities.
“Tighter global financial conditions and elevated political and policy uncertainty could lead to financial market adjustments, further weighing on the overall outlook,” it said.
On the Malaysia economy, it said after growing at a more moderate pace of 4.7% in 2018, “growth is expected to be sustained in 2019 with continued support from private sector spending”.
Bank Negara said the baseline forecast was for the Malaysian economy to remain on a steady growth path.
“However, materialisation of downside risks from unresolved trade tensions, heightened uncertainties in the global and domestic environment, and prolonged weakness in the commodity-related sectors could further weigh on growth,” it said.
At the current level of the OPR, the degree of monetary accommodativeness is consistent with the intended policy stance.
“Recognising that there are downside risks in the economic and financial environment, the Monetary Policy Committee will continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation,” it said.
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