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.

The Malaysian economy has performed well during the first half of 2006, sustained by strong domestic private demand and global economic growth. While the external environment may become less favourable in the second half of the year due to an anticipated softening of global growth, its impact on the domestic economy is expected to be modest.

Inflation is expected to moderate during the remaining part of the year. At this stage, there are also no signs of second round effects and wage pressures. However, this relatively benign outlook has to be tempered by the fact that commodity and oil prices remain high and there continues to be cost driven pressures on prices. Given the uncertainty about the transmission of increases in producer prices to consumer prices, continued vigilance is warranted.

The future stance of monetary policy would therefore depend on Bank Negara Malaysia's assessment of new developments and their impact on the inflation outlook and economic growth prospects.