Excerpts from the statement by the Bank Negara Malaysia:
In this challenging environment, the Malaysian economy is expected to expand at a more moderate pace in 2016 after registering a 5 percent growth in 2015. The prospects are for domestic demand to remain as the key driver of growth. While private consumption is expected to moderate, household spending will continue to be supported by the growth in income and employment, and the additional disposable income from the measures announced during the 2016 Budget Recalibration. Overall investment will continue to be supported by the implementation of infrastructure development projects and capital spending in the manufacturing and services sectors. The external sector is expected to record a modest improvement and provide additional support to the economy.
For 2016, inflation is expected to be higher compared to 2015, given the adjustments in administered prices and the weaker ringgit exchange rate. The impact of these cost factors is, however, expected to be mitigated by the continued low energy and commodity prices and the generally subdued global inflation. Consequently, the inflation momentum is expected to be slower than earlier anticipated.
Overall domestic financial conditions have remained relatively stable since the previous MPC meeting. Bank Negara Malaysia’s monetary operations continue to ensure that there is sufficient liquidity to support the orderly functioning of the money and foreign exchange markets. The financial system continues to be sound with financial institutions operating with sufficient liquidity buffers. The growth of financing to the private sector has also remained healthy.
At the current level of the OPR, the stance of monetary policy is accommodative and supportive of economic activity. The MPC recognises that there are heightened risks in the global economic and financial environment and is closely monitoring and assessing their implications on domestic price stability and growth. This is to ensure that the monetary policy stance is consistent with sustainable growth of the Malaysian economy.