Monetary Policy StatementRef No : 01/09/04 21 Jan 2009 Embargo : Not for publication or broadcast before 1800 hours on Wednesday 21 January 2009
The international economic and financial conditions have deteriorated much more significantly in the recent period. The major industrial economies are now experiencing a recession and this has significantly increased the risks to global growth. The contraction in global demand and trade, combined with the reduction in global commodity prices, has affected the export earnings of many of the regional economies, including Malaysia. These contractionary factors have been exacerbated by the protracted turmoil in the international financial markets.
The sharper deterioration of the global economy is expected to have a greater impact on the Malaysian economy. The large decline in external demand has already led to a contraction in exports and a moderation in the pace of private investment activity. In addition, these developments have also affected labour market conditions. Under these circumstances, the urgent implementation of policy measures will be key towards ensuring that the Malaysian economy continues to experience positive growth in 2009.
In an environment of moderating growth and the significantly lower commodity prices, inflation has continued to decelerate to 4.4 percent in December 2008. This deceleration is expected to continue with the weaker demand conditions and lower imported inflation.
Given that the Malaysian banking system remains fundamentally sound, the Bank's efforts will continue to be directed towards ensuring access to credit to all sectors of the economy, and that the reduction in interest rates would be reflected in lower borrowing costs.
Bank Negara Malaysia
21 Jan 2009
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