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Monetary Policy Statement

Ref No : 10/07/07 30 Oct 2007 Embargo : Not for publication or broadcast before 1800 hours on Tuesday 30 October 2007

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

Malaysia's domestic economic fundamentals continue to remain sound with sustained growth in domestic demand. However, downside risks to global growth and trade have increased in recent months due to higher oil prices and the uncertainty in the global financial markets. While this will pose a risk to the Malaysian growth outlook, the strength of domestic fundamentals will have a mitigating role in reducing the impact.

Inflation over the medium term is expected to be affected by rising global food and commodity prices. However, at below two percent, the current inflation rate is among the lowest in the region. While further upward price adjustments may occur, overall inflation is still expected to be contained. With the economy growing below potential, the prospect for demand induced pressures on prices is also reduced. Furthermore, in the event that global growth is lower than currently projected, it would have a mitigating effect on global prices.

Given the current uncertainty surrounding future trends in factors affecting inflation and global growth, the stance of monetary policy going forward will be determined by new data and information and its implications on the medium-term prospects for price stability and economic growth.

Bank Negara Malaysia
30 Oct 2007

© Bank Negara Malaysia, 2007. All rights reserved.