Malaysia’s central bank left its benchmark Overnight Policy Rate (OPR) at 3.0 percent but took the first step toward tighter monetary policy by saying it “may consider reviewing the current degree of monetary accommodation” given strong strong global and domestic economic conditions.
Voicing confidence about the outlook for the global and domestic economy in 2018, Bank Negara Malaysia (BNM) said the country’s economic growth had “become more entrenched,” with growth momentum spilling over from the external sector to the domestic economy as firms invest in production facilities, raise wages and hire more workers.
“For 2018, domestic demand is expected to remain the key source of growth,” BNM said, adding overall growth is expected to remain strong next year following better-than-expecteed growth in 2017.
Malaysia’s economy expanded by a higher-than-expected annual rate of 5.8 percent in the second quarter of this year, up from 5.6 percent in the first quarter.
In August the central bank said growth this year will probably exceed the forecast of 4.8 percent. Growth in 2016 was estimated at 4.2 percent.
BNM, which in July last year cut its rate for the first time since March 2009, expects inflation this year to be in the upper end of its forecast range and then moderate next year.
However, the central bank added that oil prices will determine the trend in inflation and underlying inflation, as measured by core inflation, will be sustained by robust domestic demand.
Malaysia’s headline inflation rate rose to 4.3 percent in September from 3.7 percent.
After tumbling in the immediate aftermath of last year’s election of Donald Trump as U.S. president, Malaysia’s ringgit has been appreciating this year and was trading at 4.19 to the U.S. dollar today, up just over 7 percent this year.
Bank Negara Malaysia issued the following statement:
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