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Monetary Policy Statement

Ref No : 01/08/05 29 Jan 2008 Embargo : Not for publication or broadcast before 1800 hours on Tuesday 29 January 2008

At its meeting today, Bank Negara Malaysia's Monetary Policy Committee decided to leave the Overnight Policy Rate (OPR) unchanged at 3.50 percent.

The Malaysian economy had performed well in 2007 and continues to maintain a steady momentum. However, developments in the global financial markets have increased the level of uncertainty over global growth. Economic indicators in the large industrial countries are increasingly indicating heightened downside risks to the prospects for global growth. The impact of these external developments on the Malaysian economy will depend on the relative strength of the domestic economy and the degree of moderation in the trade sector.

Meanwhile, global price pressures have been increasing, due largely to high global energy, food and commodity prices. Consequently, inflation in Malaysia has also been on an increasing trend since the second half of 2007. In the near term, the risks to inflation are mainly on the upside. However, the slower global growth may have a moderating effect on global prices and thereby reduce the cost pressures being felt by the domestic economy.

The interaction between the downside risks to growth and the upward risks to domestic prices will be monitored carefully and pre-emptive measures would be taken if necessary. The future thrust of monetary policy would depend on new information and our assessment of the change in the balance of risks to the medium term outlook for inflation and growth.

Bank Negara Malaysia
29 Jan 2008

© Bank Negara Malaysia, 2008. All rights reserved.