“At the current level of the OPR, the degree of monetary accommodativeness is consistent with the policy stance to ensure that the domestic economy continues on a steady growth path amid stable inflation, supported by continued healthy financial intermediation in the economy.
“The risk of destabilising financial imbalances has been contained. However, the MPC will be monitoring these risks to ensure the sustainability of the overall growth prospects,” Bank Negara said in the statement.
“Going forward, private sector activity will remain the key driver of growth. Private consumption is expected to be sustained by continued wage and employment growth, with additional support from Government measures to increase disposable income.
“Investment activity, although moderating, will be supported by on-going infrastructure investments and capital expenditure in the manufacturing and services sectors,” it said.
On the external front, exports are expected to expand but will be constrained by soft demand from Malaysia’s key trading partners.
Overall, the domestic economy remains on track to expand as projected in 2016 and 2017.
Headline inflation for 2016 is expected to be at the lower end of the projected range of 2.0% – 2.5%. Inflation is expected to remain relatively stable in 2017 given the environment of low global energy and commodity prices, and generally subdued global inflation.
Bank Negara noted that the ringgit, along with most emerging market currencies, had experienced sharp adjustments and significant volatility due to continuing uncertainties in global economic and policy environment, and geopolitical developments. These factors could result in periods of volatility in the regional financial and foreign exchange markets.
“In this regard, Bank Negara will continue to provide liquidity to ensure the orderly functioning of the domestic foreign exchange market.
“The capital market remains accessible, deep and liquid. Banking system liquidity is ample. Financial institutions continue to operate with strong capital and liquidity buffers and the growth of financing to the private sector is consistent with the pace of economic activity,” it added.