Bank Negara Malaysia (BNM) has kept the overnight policy rate (OPR) at three percent as the domestic economy continued to expand during the third quarter of 2016.
At the current level of the OPR, the central bank said the degree of monetary accommodativeness is consistent with the policy stance to ensure that the domestic economy continues on a steady growth path amid stable inflation, supported by continued healthy financial intermediation in the economy.
“The risk of destabilising financial imbalances has been contained. However, the MPC will be monitoring these risks to ensure the sustainability of the overall growth prospects,” it said in a statement.
It noted that the growth in the domestic economy was mainly driven by private sector activity with some support from net exports.
“Going forward, private sector activity will remain the key driver of growth. Private consumption is expected to be sustained by continued wage and employment growth, with additional support from government measures to increase disposable income.”
“Investment activity, although moderating, will be supported by on-going infrastructure investments and capital expenditure in the manufacturing and services sectors,” it said.
And while exports are expected to increase, its growth will be weighed down by the soft demand coming from key trading partners.
Nonetheless, domestic economy remains on track to expand as projected in 2016 and 2017, said BNM.
Headline inflation for this year is expected to hover at the lower end of two to 2.5 percent, while remaining relatively stable next year given the generally subdued global inflation and the environment of low global energy and commodity prices.
Commenting on the ringgit, BNM said it will continue to provide liquidity to ensure the orderly functioning of the domestic foreign exchange market.
It revealed that the ringgit, along with the currencies of most emerging markets, had witnessed sharp adjustments and significant volatility due to continuing uncertainties in global economic and policy environment, and geopolitical developments.
“The capital market remains accessible, deep and liquid. Banking system liquidity is ample. Financial institutions continue to operate with strong capital and liquidity buffers and the growth of financing to the private sector is consistent with the pace of economic activity,” added BNM.
Mangalesri Chandrasekaran, Editor at PropertyGuru, edited this story. To contact her about this or other stories email mangales@propertyguru.com.my
