KUALA LUMPUR: The Overnight Policy Rate (OPR) remains at three per cent.
This was decided by the Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) at its meeting here yesterday.
In a statement, BNM said at the current level of the OPR, the stance of monetary policy is accommodative and supportive of economic activity.
“The MPC will continue to assess the balance of risks surrounding the outlook for domestic growth and inflation,” it added.
BNM said the growth momentum for Malaysia from the second half of 2016, is expected to strengthen in the first quarter of 2017, and be sustained for the rest of the year.
“Growth will be mainly driven by domestic demand amid continued wage and employment growth, and implementation of new and on-going investment projects.
“On the external front, given the improvement in global growth, exports are expected to perform more strongly and contribute positively to Malaysia’s economic performance,” it said.
Headline inflation increased to 4.3 per cent in the first quarter of the year, in line with the MPC’s expectations.
“The increase in inflation reflected mainly the pass-through impact of higher global oil prices and temporary supply disruptions that led to higher food prices.
‘The higher headline inflation is also expected to moderate in the second half of the year. However, the trend of domestic headline inflation will be dependent on future global oil prices which remain highly uncertain,” BNM said.
The central bank said cost-push inflation is not expected to have a significant impact on the broader price trends given the stable domestic demand conditions.
Underlying inflation, as measured by core inflation, is expected to increase only modestly.
“The banking system liquidity remains sufficient. Financial institutions continue to operate with strong capital and liquidity buffers and the growth of financing to the private sector is consistent with the pace of economic activity,” BNM said.
The global economy, according to BNM, continues to expand and industrial activity and global trade had picked up.
“Growth is also becoming more synchronised across the advanced and emerging economies. Indicators suggest that the outlook for the global economy will continue to improve.
‘In the advanced economies, the revival in investment is expected to provide an additional impetus to economic activity. In the emerging economies, growth is projected to be supported by sustained domestic activity and stronger external demand,’ it said.
BNM said nevertheless, there remained risks to global growth, arising from threats such as protectionism, geopolitical developments and commodity price volatility and these could also reignite financial market volatility. — Bernama