Bank Negara keeps benchmark rate at 3%

PETALING JAYA: Bank Negara Malaysia has maintained the Overnight Policy Rate (OPR) at 3% at its Monetary Policy Committee (MPC) meeting.
The central bank said in a statement that at the OPR’s current level, monetary policy stance is accommodative and supportive of economic activity.
“The MPC will continue to assess the balance of risks surrounding the outlook for domestic growth and inflation,” it noted.
Bank Negara is of the view that economic growth momentum is expected to be sustained in 2017.
“With the growth of domestic demand being sustained, the more positive contribution from the external sector will lead to a better performance of the Malaysian economy,” it said.
Despite the challenging global and domestic environment, Bank Negara said, the local economy managed to register 4.2% growth in 2016, underpinned by private sector activity as well as additional support from the turnaround in net exports.
Looking beyond the country, the central bank said economic activity in the advanced and emerging economies has continued to improve, with global trade showing a recovery.
“In this environment, the Asian economies are benefiting from stronger external demand amid sustained domestic activity,” it said, noting that the global economy is projected to expand at a slightly faster pace in 2017.
Nevertheless, Bank Negara said, there remain risks to global growth arising from threats such as protectionism, geopolitical developments, heightened volatility of financial markets and negative developments in the prices of key commodities.
Meanwhile, the central bank expects headline inflation to be higher this year, reflecting primarily the pass-through impact of the increase in global oil prices on domestic retail fuel prices.
However, it stressed that the cost-driven inflation is not expected to have a significant impact on the broader price trends given the stable domestic demand conditions, with core inflation seen to increase modestly.

On the currency front, Bank Negara said the ringgit, along with other emerging market currencies, has continued to stabilise.
“The implementation of financial market development measures has had a positive impact on the domestic financial markets.
“Banking system liquidity remains sufficient. Financial institutions continue to operate with strong capital and liquidity buffers and the growth of financing to the private sector is consistent with the pace of economic activity,” it added.