Malaysia’s central bank explained that the Overnight Policy Rate (OPR) reduction was the first in seven years, to ensure that the monetary policy steers the domestic economy on a steady growth path.
Notably, uncertainties within the global environment could affect the growth prospects of the country, even as the domestic economy is on track to expand in 2016 to 2017, said Bank Negara Malaysia (BNM) in a statement released after yesterday’s Monetary Policy Committee (MPC) meeting.
It noted that the global economy continues to register growth at a more moderate pace in major advanced and emerging market economies.
Over in Asia, persistent weakness within the external sector has taken a toll on the region’s growth, although domestic demand remains supportive. BNM, however, noted increasing signs of moderating growth momentum in key economies.
Global growth prospects also became more susceptible to increased downside risks in view of possible repercussions from the EU referendum in the United Kingdom. With this, international financial markets may be subject to greater volatility.
“In this light, global monetary conditions are expected to remain highly accommodative,” said the central bank.
In fact, BNM remained optimistic on domestic demand, which it said will continue to be the primary driver of growth, along with private consumption boosted by growth in employment and income as well as measures introduced by the government.
“While investment in the oil and gas sector is moderating, overall investment is expected to be supported by the on-going implementation of infrastructure projects and capital spending in the manufacturing and services sectors,” said BNM.
It also expects exports to remain weak following more subdued demand from the country’s key trading partners.
As such, BNM expects inflation to be lower at around 2% to 3% in 2016, compared to an earlier projection of 2.5% to 3.5%, and continue to remain stable next year.
Since the previous MPC meeting, overall domestic financial conditions have remained stable, as the risks of destabilising financial imbalances receded, it said.
“Both macro and micro-prudential measures as well as supervisory oversight have resulted in more prudent lending standards and contained speculative activities in the property market,” said BNM.
Image: Sourced from freemalaysiatoday.com
Mangalesri Chandrasekaran, Editor at PropertyGuru, edited this story. To contact her about this or other stories email mangales@propertyguru.com.my
