BNM maintains OPR at 3%, inflation to remain moderate

KUALA LUMPUR: Bank Negara Malaysia (BNM) is maintaining the overnight policy rate (OPR) at 3% and it expects domestic demand to continue to underpin economic growth.
It said on Thursday headline inflation was expected to remain moderate for the remainder of 2012 and into 2013.
"With some excess capacity in the economy, domestic demand is not expected to result in inflationary conditions," it said.
BNM,
had during its monetary policy committee meeting on Thursday, decided
to keep the OPR unchanged at 3% as there continues to be considerable
uncertainties in the global economic and financial conditions.
"In
this environment, the MPC considers the current stance of monetary
policy to be accommodative and supportive of the economy. The MPC will
continue to carefully assess these evolving conditions and their
implications on the overall outlook for inflation and growth of the
Malaysian economy," it said.
On the global economy, it said
growth momentum has moderated. It pointed out that economic activity in
most major advanced economies was slower amid greater policy
uncertainty while conditions in the international financial markets
continue to be volatile.
BNM said in emerging economies
including in Asia, domestic demand was showing signs of moderation amid
sustained weakness in external activity.
"While the Malaysian
economy is affected by these global developments, domestic demand has
continued to support economic growth. Looking ahead, this trend is
expected to continue," it said.
BNM said that private consumption is supported by income growth and stable employment conditions.
As
for investment activity, it was mainly driven by capital spending in
the domestic-oriented industries, the oil and gas sector and the
on-going implementation of infrastructure projects. On inflation, BNM
said global energy and commodity prices were likely to be contained
given the weak global conditions.
However, it cautioned that
upside risks to inflation could emerge should supply disruptions result
in higher global prices for commodities.