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Monetary Policy Statement

Ref No : 05/07/08 28 May 2007 Embargo : Not for publication or broadcast before 1800 hours on Monday 28 May 2007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.

Despite the less favourable external environment which has had a moderating effect on Malaysia's export growth, strong domestic demand has sustained the growth of the Malaysian economy. The public sector has also had an important positive impact on domestic economic activity. The Malaysian economy is therefore expected to sustain steady growth over the medium term.

Inflation during the first four months of 2007 averaged 2.4% and has continued its downward trend. Going forward, the continued high prices of commodities and agricultural products, and the rise in global food prices could have implications for domestic food prices and overall inflation. Taking into account these developments and the low inflation prevailing currently, the expectations are that the average rate of inflation for 2007 would be within the projected range of 2-2.5 percent.

Given the medium term outlook for inflation and economic growth, the current level of the policy rate remains appropriate. In view of the uncertainty in the external environment, developments in the international economy would be monitored closely. The future stance of monetary policy would be determined by Bank Negara Malaysia's assessment of new data and information and its implications on the prospects for price stability and economic growth.

Bank Negara Malaysia
28 May 2007

© Bank Negara Malaysia, 2007. All rights reserved.