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Monetary Policy Statement

Ref No : 09/10/02 02 Sep 2010 Embargo : Not for publication or broadcast before 1800 hours on Thursday 02 September 2010
At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 2.75 percent.

The global growth momentum has moderated in recent months. In the advanced economies, growth has slowed by more than expected following continued weakness in the labour market and the fading impact of the temporary boost to economic activity provided by the inventory build up and the policy stimulus. For the regional economies, after registering strong economic expansion in the first half of the year, the slower pace of export growth will have some impact on economic performance. Domestic economic activity, however, remains strong. Given these developments, the assessment going forward is for the global recovery to proceed at a more moderate pace.

The Malaysian economy expanded strongly in the first half of this year, underpinned by strengthening domestic demand, particularly in the private sector. As in other regional countries, Malaysia's export growth has, however, slowed in recent months. These conditions are expected to continue with the slowing of global growth. While these external developments may result in a moderation in the pace of growth of the Malaysian economy, moving forward, the overall growth will continue to be supported by the robust domestic economic activity. Leading indicators suggest that private consumption and private investment will continue to expand. This is also supported by the favourable labour market conditions, positive consumer and business sentiments, low inflation and conducive credit conditions.

Domestic inflation edged higher in June and July mainly on account of increases in food and energy prices. Despite the adjustment in retail fuel prices in July, inflation is expected to rise at a modest pace in the coming months. Going into 2011, inflation is projected to continue to remain moderate.

The MPC considers the current monetary policy as appropriate and consistent with the latest assessment of the economic growth and inflation prospects. At the current level of the OPR, the stance of monetary policy continues to remain accommodative and supportive of economic growth.

Bank Negara Malaysia
02 Sep 2010

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