At the Monetary Policy Committee
(MPC) meeting today, Bank Negara Malaysia decided to maintain the Overnight
Policy Rate (OPR) at 3.00 percent.
The global economy continues to experience modest growth. The strength of
the recovery in the major advanced economies has yet to gain momentum. While
domestic demand continues to support growth in emerging market economies,
the growth momentum has moderated. Although global monetary conditions
remain highly accommodative, market uncertainties on the direction of policy
have resulted in substantial volatility in global financial markets. The
reversal of capital flows from the emerging economies following a prolonged
period of strong inflows has resulted in the depreciation of emerging market
currencies.
In the Malaysian economy, domestic demand has continued to support growth
amid the weaknesses in external demand. Going forward, economic growth is
expected to be underpinned by the continued expansion in domestic activity.
Sustained income growth and stable labour market conditions will support
private consumption. The impact of subsidy adjustments on consumption
spending is expected to be contained by targeted financial assistance.
Domestic investment activity which has been robust will continue to be led
by capital spending in the domestic-oriented industries and the ongoing
implementation of infrastructure projects. Overall growth prospects,
however, could be affected by risks in the global economy and international
financial markets.
Inflation remained low at 1.7% in the first seven months of the year. Going
forward, inflation is expected to increase in the remainder of the year and
into 2014 resulting from domestic cost factors, including subsidy
adjustments. The increase in inflation, however, is from a low level and
will be mitigated by a stable external price environment, expansion in
domestic capacity and moderate domestic demand pressures.
In the MPC’s assessment, there are increased uncertainties to the balance of
risks surrounding the outlook for domestic growth and inflation. The MPC
will continue to carefully assess the global and domestic economic and
financial developments and their implications on the overall outlook for
inflation and growth of the Malaysian economy.
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