Malaysia’s central bank kept its key rate unchanged as policymakers said the current stance is accommodative and supportive of economic activity.
The Monetary Policy Committee of Bank Negara Malaysia decided to maintain the overnight policy rate at 3.25 percent. The outcome of the meeting came in line with expectations.
Looking ahead, the bank said the prospects are for the economy to remain on a steady growth path, with domestic demand remaining as the key growth driver.
Although private spending is set to moderate due to the introduction of the Goods and Services Tax, consumption would be underpinned by the steady rise in incomes as well as employment, the bank said.
Investments in export-oriented industries, services and infrastructure projects will cushion the impact of the lower oil and gas-related investment activity, the bank noted. While export growth will be affected by lower commodity prices, manufactured exports will continue to benefit from improved activity in several advanced economies.
The bank expects headline inflation to trend higher given the impact of the implementation of the GST. This is expected to be partially offset by the overall lower global commodity and energy prices. Underlying inflation is forecast to remain contained amid the stable domestic demand conditions.
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