KUCHING: Bank Negara Malaysia (BNM) has decided to maintain the Overnight Policy Rate (OPR) at 3.25 per cent during the Monetary Policy Committee (MPC) meeting on Thursday.
According AmResearch Sdn Bhd (AmResearch), the downside risk to the global economic outlook remains on the back of weak growth prospects.
“The uncertainties in the policy environment are also contributing to the shift in sentiments in the international financial markets. For Malaysia, economic activity continues to be supported by the growth in domestic demand amid a moderation in exports in fourth quarter 2014 (4Q14).
“While export growth will be affected by lower commodity prices, the performance of manufactured exports is expected to improve. BNM expects the Malaysian economy to remain on a steady growth path.
“As for inflation, BNM expects price pressure to be below its historical average as the lower fuel prices will partially offset other domestic cost factors,” said the research house.
“Our estimate suggests that every one per cent on month increase/decrease for Brent crude oil price, ceteris paribus, the price of RON95 will rise/fall by between 1.5 sen to 1.7 sen per litre on month,” it added.
For February, prices are likely to remain in check as petrol pump prices are reduced further. Inflation rate is expected to remain unchanged on a on year basis.
Petrol pump prices were reduced further in February prior to an increase in March. In February, RON 95 was priced at RM1.70, RON 97 stood at RM2.00 and diesel was RM1.70 per litre.
By end-January, WTI crude oil price fell by 16.5 per cent to close at US$44.5 per barrel and Brent crude oil price fell by 16 per cent to US$46.8 per barrel.
As a recap, inflation registered a slower growth of one per cent on year in January, owing to the downward adjustment in petrol prices.
“Elsewhere, we note that the excess liquidity of financial institutions have been deteriorating since September last year.
“As of January 2015, the surplus level declined to RM170.8 billion. That said, the Bank highlighted that the domestic financial system has ample liquidity with strong capital and liquidity buffers.”
The MPC will also continue to monitor the risks of destabilising financial imbalances to ensure that the monetary policy stance is consistent with the sustainability of growth prospects.