Malaysia's central bank maintained its benchmark Overnight Policy Rate (OPR) at 3.0 percent and said it would continue to provide liquidity to ensure orderly financial markets as "uncertainties in the global economy, the policy environment and geopolitical developments may, however, result in bouts of volatility in the regional financial and foreign exchange markets."
Bank Negara Malaysia (BNM), which in July 2016 cut its rate for the first time since March 2009, said volatile trading in the ringgit, and other emerging market currencies, had eased since "sharp adjustments towards the end of 2016" due to measures taken to stabilize the foreign exchange market.
Liquidity in the banking system remains ample and financial institutions continued to operate with strong capital and liquidity buffers, the central bank said, adding that growth of financing to the private sector was consistent with the pace of economic activity.
The exchange rate of the ringgit tumbled in the wake of the U.S. presidential election in November last year to hit lows not seen since the Asian financial crises in 1998. The ringgit breached a psychological level of 4.45 to the U.S. dollar in late November despite measures by the central bank to curb offshore ringgit trade and boost onshore trading.
The measures brought back fears that BNM would introduce capital controls that were put in place in the late 1990s but Governor Muhammad Ibrahim said last week the central bank only wanted to reduce speculation in the currency to stabilize it and there were no plans for capital controls.
After falling to 4.49 to the dollar in early January - down 6.7 percent since the election of Donald Trump as U.S. president - the ringgit has stabilized and was trading at 4.449 today, up 0.83 percent since the start of this year.
Malaysia's economy bounced back in the third quarter of last year following five quarters of slowing growth and the BNM said latest data "point to continued expansion in the fourth quarter."
Gross Domestic Product grew by an annual rate of 4.3 percent in the third quarter, up from 4.0 percent in the second quarter and the central bank said private sector activity will remain a key driver of growth, with private consumption sustained by continued growth in wages and employment.
"On the external front, the expected improvement in exports will provide some support to growth," the bank said, adding that the economy is on track to expand as projected.
Malaysia's government has forecast growth of 4.0 to 5.0 percent in 2017, up from a range of 4.0-4.5 percent for 2016.
Bank Negara Malaysia issued the following statement: