At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to leave the Overnight Policy Rate (OPR) unchanged at 2.00 percent.

Since the MPC in July, more signs have emerged to suggest that global economic and financial conditions are improving. Economic activity in some advanced and regional countries has begun to gradually recover in response to the significant fiscal and monetary measures that have been implemented. Economic recovery, however, will likely be a slow process as some of these economies undergo further structural adjustments.

In the domestic economy, recent financial and economic indicators, including industrial production, financing trends, consumer and business sentiment, and retrenchments, reaffirm the assessment that economic conditions are stabilising. Going forward, the expectation remains that the domestic economy will improve in the second half of 2009 and into 2010, following a recovery in domestic demand amidst stabilisation of the global economy.

Inflation declined further in July. As in the previous month, the decline largely reflects the cumulative fall in fuel prices since June 2008, and the easing pressure on food prices. The negative inflation is expected to be temporary and is projected to turn positive as domestic conditions strengthen.

With improving domestic economic conditions and as price pressures are expected to remain benign going forward, the assessment is that the current monetary policy stance is appropriate and will continue to provide support for economic activity.