Malaysia Holds Key Rate Steady at 3.25% in March



The Central Bank of Malaysia left its benchmark overnight policy rate unchanged at 3.25 percent on March 7th 2018, as expected. Policymakers said the decision is in line with the policy stance to ensure that domestic economy continues on a steady growth path amid lower inflation.

Previously on 25th January this year, Malaysia raised its key rate by 25 basis points to 3.25 percent from 3 percent. It was the first rate hike in 3-1/2 years.

Statement by the Bank Negara Malaysia:

The global economy continues to strengthen. Global trade is showing strong growth momentum. In the advanced economies, rising wages and policy support will provide further impetus to growth. In Asia, growth will be driven by sustained domestic activity and strong external demand. Recent adjustments in the financial markets, though short-lived, indicate that volatility may reemerge. Trade tensions have also risen in the recent period. At this point, risks to the global growth outlook remain balanced, pointing towards continuity in global economic expansion.

For Malaysia, the strong growth performance in the fourth quarter of 2017 continued to be anchored by private sector spending. Looking ahead, growth prospects will be sustained by the positive global growth outlook and spillovers from the external sector to the domestic economy. Domestic demand will remain the key driver of growth, underpinned by favourable income and labour market conditions, spending on new and ongoing infrastructure projects and sustained capital investment by firms in the manufacturing and services sectors. With additional impetus from the external sector, growth is expected to remain strong in 2018.

Inflation is projected to average lower in 2018, on expectations of a smaller effect from global cost factors. A stronger ringgit exchange rate compared to 2017 will mitigate import costs. Global energy and commodity prices are expected to trend higher in 2018, but at a more moderate pace relative to the previous year. However, the trajectory of headline inflation will be dependent on future global oil prices which remain highly uncertain. Underlying inflation, as measured by core inflation, is also projected to moderate due to improving labour productivity and ongoing investments for capacity expansion.

The domestic financial markets have been resilient. The broad appreciation of the ringgit in the past year better reflects the economic fundamentals. Banking system liquidity remains sufficient with financial institutions continuing to operate with strong capital and liquidity buffers. The growth of financing to the private sector has been sustained and is supportive of economic activity.

At the current level of the OPR, the degree of monetary accommodativeness is consistent with the policy stance to ensure that the domestic economy continues on a steady growth path amid lower inflation. The Monetary Policy Committee/MPC  will continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation.


Malaysia Holds Key Rate Steady at 3.25% in March


Bank Negara Malaysia l Rida Husna | rida@tradingeconomics.com
3/7/2018 7:55:12 AM