Thursday, July 7, 2011

Bank Negara Malaysia Holds Rate at 3.00%, Lifts Reserve Requirements

The Bank Negara Malaysia maintained the Overnight Policy Rate (OPR) unchanged at 3.00%, and held the floor and ceiling rates of the corridor for the OPR at 2.75 percent and 3.25 percent respectively.  However the Bank increased the Statutory Reserve Requirement (SRR) ratio by 100 basis points to 4.00% from 3.00%, effective from 16 July 2011.  The Bank said: "The decision to raise the SRR is undertaken as a measure to manage the significant build-up of liquidity, which may result in financial imbalances and create risks to financial stability."

The Bank Negara Malaysia last increased the OPR by 25 basis points to 3.00% in May this year, it also increased the SRR by 100bps to 3.00% at that meeting.  Malaysia saw inflation of 3.3% in May, up from 3.2% in April, and 3.0% March, bringing the average to 2.8% for the first quarter of 2011.  The Malaysian economy contracted -3.2% in the March quarter (+1.5% in Q4 2010), while growing 4.6% on an annual basis (4.8% in Q4 2010), according to Trading Economics.


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