PETALING JAYA: Bank Negara has decided to leave the overnight policy rate (OPR) unchanged at 3.5% after evaluating the downside risks to growth and the upside risks to inflation.
The central bank said the latest available data indicated that major industrial economies were experiencing a moderation of economic activities, which was likely to lead to slower global growth in the months ahead.
“While the slower external demand will have some moderating impact on the Malaysian economy, growth continues to be supported by an expansion in domestic demand,” it said in a statement issued yesterday following a meeting of its monetary policy committee.
The central bank said the strong imports of capital goods, manufacturing investment approvals and foreign direct investment inflows indicated sustained investment activity.
It said despite the global financial turmoil, domestic credit conditions were still favourable as demand for financing was underpinned by ample liquidity in the financial system.
Bank Negara said domestic food prices had risen due to the increase in global prices. The food price increase, it added, was a structural phenomenon that required measures to ensure adequate supply, the creation of appropriate incentive structures to promote higher food production, and making the production and distribution chain more efficient.
“The bank’s forecast of 2.5% to 3% average inflation in 2008 has built in some administered price adjustments,” it said.
Source: The Star
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