Update Zeti : Bank Negara to assess inflation risks, financial imbalance before adjusting interest rate

by **Cals** Wed 19 Mar 2014, 22:12

Update Zeti : Bank Negara to assess inflation risks, financial imbalance before adjusting interest rate

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Wednesday, 19 March 2014 19:11

KUALA LUMPUR (Mar 19): Bank Negara Malaysia (BNM) will assess inflationary risks to growth, and financial imbalances before adjusting interest rates, according to the central bank's governer Tan Sri Dr Zeti Akhtar Aziz.

Zeti said BNM which maintained the overnight policy rate at 3.00% at its latest monetary policy committee meeting, was still assessing these factors.

"We are taking into consideration whether there are signs of inflation becoming persistent and pervasive, and significant slowdown in growth," Zeti at a press conference today.

The press conference was in conjunction with the release of BNM's annual report and financial stability and payment systems report.

She said BNM was also assessing if there was a destabilising build-up of financial imbalances.

BNM's annual report indicates that the central bank forecasts Malaysia's headline inflation to range between 3% and 4% this year, higher than the 2.1% seen in 2013.

In 2014, BNM expects the country's gross domestic product (GDP) to grow between 4.5% and 5.5%. This compares with the 4.7% expansion in 2013.

Responding to questions on the ringgit, she said the currency would remain volatile in 2014 due to capital inflows and outflows. However, the central bank would ensure fundamentals of the local currency stay intact.

She said Malaysia's current account was in a surplus, while international reserves remained high. Zeti also said the country was on a steady growth path.

"These are the underlying fundamentals that support our currency. In addition, our external debt is also relatively low at 30% of GDP, which is very manageable.

"There is no risk of vulnerability for our international position with respect to the ringgit," said Zeti.

The ringgit was traded at 3.2782 versus the US dollar at the time of writing.