Monetary Policy StatementRef No : 07/11/03 07 Jul 2011 Embargo : Not for publication or broadcast before 1800 hours on Thursday 07 July 2011
The global economic recovery in the second quarter of the year was affected by supply disruptions arising from natural disasters and geopolitical developments, the impact of fiscal consolidation measures, the more uncertain conditions in the global financial markets and the higher commodity prices. Going forward, global growth will remain highly uneven across regions, with increased downside risks. For the region, growth is expected to be sustained by robust domestic demand, increased investment activity and intra-regional trade.
In the domestic economy, the latest indicators point to a moderation in growth in the second quarter, due primarily to slower external demand, greater than expected disruptions in the global manufacturing supply chain and lower than projected public sector investment. Private consumption and investment have, however, continued to be important drivers of growth. Going forward, growth is expected to improve, underpinned by continued strength in private consumption and private investment. This growth prospect however, could be affected by the heightened external risks.
Domestic headline inflation increased to 3.3% in May on account of higher food and fuel prices. Supply factors continue to be the key determinant affecting consumer prices with global commodity and energy prices projected to remain elevated. There are also some signs that domestic demand factors could exert upward pressure on prices in the second half of the year.
The MPC’s assessment is that the risks to inflation are on the upside. While the outlook for growth remains positive, there are heightened uncertainties arising from global developments that have created higher downside risks to growth. The MPC will assess carefully the evolving economic conditions and to the extent that the growth momentum is sustained, further normalisation of monetary conditions will be considered to safeguard price stability.
Bank Negara Malaysia
07 Jul 2011
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