The Central Bank of Malaysia left its benchmark interest rate unchanged at 3.25 percent on March 5th, 2019, as widely expected. Policymakers that the decision in consistent with the intended policy stance, amid a slowdown in external sector. For 2019, inflation is expected to be broadly stable compared to 2018. The Committee also noted that the economy maintains its underlying fundamental strength, with steady economic growth and stable in labour market conditions. Private consumption will remain the main driver of growth, still the domestic economy continues to face downside risks stemming from any further escalation in trade tensions and commodity related shocks.
Statement by the Bank Negara Malaysia:
The Malaysian economy grew at a more moderate pace of 4.7% in 2018. Looking ahead, growth is expected to be sustained in 2019 with continued support from private sector spending. Stable labour market conditions and capacity expansion in key sectors will continue to drive household and capital spending. Support from the external sector is expected to soften, in tandem with the moderating global growth momentum. On balance, the baseline forecast is for the Malaysian economy to remain on a steady growth path. However, materialisation of downside risks from unresolved trade tensions, heightened uncertainties in the global and domestic environment, and prolonged weakness in the commodity-related sectors could further weigh on growth.
Headline inflation in January 2019 was at -0.7%, due mainly to negative transport inflation at -7.8% arising from lower global oil prices. Underlying inflation, as measured by core inflation remained stable at 1.5% in January 2019 reflecting sustained demand conditions. In the immediate term, inflation is expected to remain low mainly due to policy measures. These include the lower price ceiling on domestic retail fuel prices until mid-2019 and the impact of the changes in consumption tax policy on headline inflation. For 2019 as a whole, average headline inflation is expected to be broadly stable compared to 2018. The trajectory of headline inflation will continue to be dependent on global oil prices. Underlying inflation is expected to be sustained, supported by the steady expansion in economic activity and in the absence of strong demand pressures.
3/5/2019 8:41:46 AM