Malaysia monetary policy to focus on growth after inflation ebbs, Government & Economy - THE BUSINESS TIMES

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Malaysia monetary policy to focus on growth

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MAR 11, 2015 7:11 PM

[KUALA LUMPUR] Malaysia's central bank said its monetary

policy this year will be focused on supporting economic
growth as inflation risks abate with the plunge in global
crude prices.
Threats to the country's expansion are increasing amid an
uneven global recovery and declines in commodity prices,
while diverging policy actions in major economies add to
uncertainty, Bank Negara Malaysia said in its annual report

http://www.businesstimes.com.sg/government-economy/malaysia-monetary-policy-to-focus-on-growth-after-inflation-ebbs[6/29/2016 2:29:02 AM]

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Malaysia monetary policy to focus on growth after inflation ebbs, Government & Economy - THE BUSINESS TIMES

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in Kuala Lumpur on Wednesday. Malaysia, which has

Asia's worst-performing currency in the past six months, will
probably experience "volatile" capital flows this year along
with other emerging markets, it said.
A slump in crude prices is hurting the oil-exporter's finances
and has forced the government to reduce spending and
lower its growth forecast. Outside Malaysia, interest-rate
increases by the Federal Reserve are looming even as
Europe's central bank buys bonds and China cuts
borrowing costs to sustain growth.
"The operating environment for monetary policy will be
shaped by key challenges on the external front, which
would affect the overall outlook for the domestic economy,"
the central bank said. "The focus of policies by the
government and the Bank will be on addressing domestic
vulnerabilities and supporting the growth of the Malaysian
economy."

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http://www.businesstimes.com.sg/government-economy/malaysia-monetary-policy-to-focus-on-growth-after-inflation-ebbs[6/29/2016 2:29:02 AM]

Malaysia monetary policy to focus on growth after inflation ebbs, Government & Economy - THE BUSINESS TIMES

drop in the past six months against the US dollar to more

than 13 per cent, according to data compiled by Bloomberg.
Bank Negara won't seek to defend the currency at any
specific level and intervenes only to maintain orderly market
conditions, central bank Governor Zeti Akhtar Aziz told
reporters on Wednesday.

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The ringgit is "significantly undervalued" at current levels,

she said.
Malaysia's inflation rate is expected to average between 2
per cent and 3 per cent this year, compared with 3.2 per
cent in 2014 and lower than an October prediction of as
much as 5 per cent. Price gains are forecast to slow even
with a new consumption tax of 6 per cent set to start in
April, with Bank Negara saying the impact of the levy will be
partly offset by the decline in oil.
The central bank left its key rate unchanged for a fourth
straight meeting this month as the weakening currency
reduced scope for it to join global counterparts in monetary
easing. It last raised the benchmark in July after growth
quickened and as it sought to curb the risk of financial
imbalances.
"In terms of the inflation outlook, the key consideration for
monetary policy is the development of underlying inflation,
which is expected to remain relatively stable amid modest
demand pressures," Bank Negara said. "Monetary policy
decisions will also continue to take into account
assessments on the potential risk of a further build-up in
financial imbalances."
More than 20 central banks from China to the euro-area and
http://www.businesstimes.com.sg/government-economy/malaysia-monetary-policy-to-focus-on-growth-after-inflation-ebbs[6/29/2016 2:29:02 AM]

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Malaysia monetary policy to focus on growth after inflation ebbs, Government & Economy - THE BUSINESS TIMES

India have eased policy this year either by cutting

benchmark rates, charging banks more to hold deposits or
making it easier for them to lend, tweaking currency bands
or announcing bond- buying programs. Many of the shifts,
including those by Canada, India and Australia, weren't
predicted by investors. Thailand surprised with a rate cut
Wednesday.
Malaysia's interest rate remains accommodative and
supportive of growth, Ms Zeti said on Wednesday.
"Many central banks that had lowered their interest rates
had actually increased their rates prior to that," Ms Zeti
said. "We will look at what are the risks to growth, given that
there are increased risks on the external horizon. We will
also look at what the risks are to inflation."
Malaysia's gross domestic product is projected to expand
4.5 per cent to 5.5 per cent this year, the central bank said,
reiterating the trimmed forecast announced by Prime
Minister Najib Razak in January. Growth will be supported
by a sustained expansion in domestic demand, driven by
private sector spending and "resilient" exports, according to
the report.
Mr Najib in January unveiled measures that can keep more
money in the country, saying Malaysia's current account
"must remain in surplus".
The current account surplus is projected to be RM21.4
billion (S$8 billion) in 2015, narrowing from RM49.5 billion
last year, according to the report.
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Malaysia monetary policy to focus on growth after inflation ebbs, Government & Economy - THE BUSINESS TIMES

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