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Monetary Policy Statement

Ref No : 09/13/01 05 Sep 2013 Embargo : Not for publication or broadcast before 1800 hours on Thursday 05 September 2013
At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 3.00 percent.
 
The global economy continues to experience modest growth.  The strength of the recovery in the major advanced economies has yet to gain momentum.  While domestic demand continues to support growth in emerging market economies, the growth momentum has moderated.  Although global monetary conditions remain highly accommodative, market uncertainties on the direction of policy have resulted in substantial volatility in global financial markets. The reversal of capital flows from the emerging economies following a prolonged period of strong inflows has resulted in the depreciation of emerging market currencies.
 
In the Malaysian economy, domestic demand has continued to support growth amid the weaknesses in external demand. Going forward, economic growth is expected to be underpinned by the continued expansion in domestic activity. Sustained income growth and stable labour market conditions will support private consumption.  The impact of subsidy adjustments on consumption spending is expected to be contained by targeted financial assistance.  Domestic investment activity which has been robust will continue to be led by capital spending in the domestic-oriented industries and the ongoing implementation of infrastructure projects. Overall growth prospects, however, could be affected by risks in the global economy and international financial markets.  
 
Inflation remained low at 1.7% in the first seven months of the year.  Going forward, inflation is expected to increase in the remainder of the year and into 2014 resulting from domestic cost factors, including subsidy adjustments. The increase in inflation, however, is from a low level and will be mitigated by a stable external price environment, expansion in domestic capacity and moderate domestic demand pressures.
 
In the MPC’s assessment, there are increased uncertainties to the balance of risks surrounding the outlook for domestic growth and inflation. The MPC will continue to carefully assess the global and domestic economic and financial developments and their implications on the overall outlook for inflation and growth of the Malaysian economy.  

Bank Negara Malaysia
05 Sep 2013

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