Highlight BNM maintains OPR at 3.25%, says household spending to be supported despite GST, lower commodity earnings

by **Cals** Thu 05 Mar 2015, 19:18

Highlight
BNM maintains OPR at 3.25%, says household spending to be supported despite GST, lower commodity earnings

By Supriya Surendran / theedgemarkets.com | March 5, 2015 : 6:41 PM MYT

UPDATE: KUALA LUMPUR (March 5): As widely expected, [size=14]Bank Negara Malaysia (BNM) has decided to maintain the overnight policy rate (OPR) at 3.25%, following its monetary policy committee (MPC) meeting today.

The central bank said domestic demand has continued to support growth amid a moderation of exports in the fourth quarter of 2014, and going forward, it will remain a key driver for growth.

“While the introduction of the Goods and Services Tax and the lower earnings in the commodity sector are expected to have some impact on private consumption, household spending will continue to be supported by the steady increase in income and employment,” said BNM in a statement today.

BNM added that headline inflation in the country had declined in January, and is expected to remain low in the first quarter of 2015.

“For the rest of the year, headline inflation is expected to trend higher, but to be below its historical average…the lower fuel prices will partially offset other domestic cost factors,” said BNM.

The central bank said while monthly headline inflation would be subjected to the volatility in global oil prices, underlying inflation is expected to remain contained, amid stable domestic demand conditions.

“The lower fuel prices are contributing to higher disposable income…investment activity is also expected to remain resilient, with broad-based capital spending by both the private and public sectors, thus cushioning the lower investment in the oil and gas sector," said BNM.

It added while export growth will be affected by the lower commodity prices, the performance of manufactured exports is expected to improve.

“The prospects are therefore for the Malaysian economy to still remain on a steady growth path, [and] at the current level of the OPR, the stance of monetary policy remains accommodative and supportive of economic activity,” it said.
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