Thursday, September 18, 2014

Malaysia maintains rate, but warns it may raise again

    Malaysia's central bank maintained its Overnight Policy Rate (OPR) at 3.25 percent but signaled that it is ready to raise rates again to ensure sustainable growth by saying a "further adjustment to the degree of monetary accommodation may be taken depending on how new information will affect the assessment of the balance of risks."
    Bank Negara Malaysia (BNM), which raised its rate by 25 basis points in July for the first time since May 2011, said its current policy stance remains supportive of growth and it would continue to assess the balance of risks surrounding the outlook for growth and inflation along with the risks of destabilizing financial imbalances.
    Although Malaysia's inflation rate has stabilized with the diminishing impact of higher utility and energy costs, the central bank expects inflation to edge higher in 2015 - after remaining stable for the rest of 2014 - and to be above its long-term average of 3.2 percent due to domestic costs.
    Mitigating these upward pressures are an absence of external price pressure and moderate demand.
    Malaysia's inflation rate rose to 3.3 percent in August from 3.2 percent in July and 3.3 percent in June.

    Malaysia's economy has been supported by continued growth in domestic demand and exports and its Gross Domestic Product expanded by 1.8 percent in the second quarter from the first quarter for annual growth of 6.4 percent, up from a rate of 6.2 percent.
    "Going forward, domestic demand is expected to moderate but remain the key driver of growth," the bank said, adding that private consumption is expected to moderate while investment will remain robes and exports will benefit from the recovery in advanced economies and regional demand.
    "The prospects are for the Malaysian economy to remain on a steady growth path," BNM said, adding its expects the global economy to expand at a moderate pace with growth in Asia supported by expansion of domestic demand and an improved external environment. 



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