Headline and core inflation remained stable

• Headline inflation and core inflation^[1] remained stable in July 2024 at 2% and 1.9% respectively.
• While there were pockets of inflationary pressures during the month, such as higher inflation for jewelry and watches and selected Consumer Price Index (CPI) services,^[2] these were mostly offset by lower inflation in food categories such as food away from home and fresh food.

Strong exports growth in July 2024

• Exports grew by 12.3% (June 2024: 1.7%), driven by broad-based improvement in both manufactured and commodities exports.
• Manufactured exports recorded a double-digit growth, supported primarily by higher non-electrical and electronics (E&E) exports and positive E&E exports growth. Commodities exports also increased, driven mainly by higher exports of palm oil and liquefied natural gas (LNG).
• Looking ahead, exports are expected to expand further amid improving external demand and the global tech upcycle.

Growth in credit to the private non-financial sector remained sustained

• Growth in credit to the private non-financial sector was sustained at 5.5% as at end-July 2024 (June 2024: 5.5%), following higher outstanding loan growth (6.2%; June 2024: 6%) while outstanding corporate bonds grew more moderately (3%; June 2024: 3.4%).
• For businesses, outstanding loan growth increased to 6% (June 2024: 5.7%), driven mainly by higher growth in working capital loans, particularly across the manufacturing and services sectors. Investment-related loan growth remained forthcoming.
• Household loan growth was sustained at 6.2% (June 2024: 6.2%) amid steady expansion in loans for the purchase of housing and cars. Loan applications were higher, reflecting the demand for financing among households.

Domestic financial markets were mostly driven by global developments, particularly shifting expectations over the US monetary policy path

• US Federal Reserve officials expressed confidence that recent readings indicated progress towards their target inflation, suggesting a potential policy rate reduction may come as early as September 2024. Consequently, financial market participants revised their 2024 US policy rate expectations to two to three cuts (June 2024: one to two cuts).
• In turn, the ringgit appreciated by 2.5% against the US dollar in July 2024, in line with most regional currencies (regional^[3] average: 1%).
• The 10-year Malaysian Government Securities (MGS) yield decreased by 14 basis points (bps) (regional^[3] average: -25 bps) alongside a decline in US bond yields, while the FBM KLCI traded higher by 2% (regional^[3] average: 2%).

Banks’ liquidity and funding positions remained supportive of intermediation activities

• The banking system continued to record healthy liquidity buffers with an aggregate Liquidity Coverage Ratio of 150.8% (June 2024: 155.1%).
• The aggregate loan-to-fund ratio remained broadly stable at 83% (June 2024: 82.8%).

The banking system resilience continues to be underpinned by sound asset quality

• Overall gross and net impaired loans ratios remained stable at 1.6% and 1% respectively.
• Loan loss coverage ratio (including regulatory reserves) continued to be at a prudent level of 124.5% of impaired loans (June 2024: 124.1%), with total provisions accounting for 1.4% of total loans.

^[1] Core inflation is computed by excluding price-volatile and price-administered items.

^[2] Including personal insurance services and recreation and cultural services.

^[3] Regional countries comprise: Singapore, Thailand, Philippines, Indonesia, and South Korea

Monthly Highlights [PDF]