Malaysia central bank keeps policy rate steady as expected after easing in May

11, Jul. 2019

KUALA LUMPUR, NNA - Bank Negara, Malaysia's central bank, on Tuesday maintained its accommodative monetary policy stance, keeping the key overnight interest rate at 3 percent, as widely expected, after cutting it from 3.25 percent at its previous policy meeting in May.

The bank warned that the U.S.-China trade dispute continued to pose a downside risk to global growth.

Key Points:

―― In a statement released after a one-day meeting on Tuesday, the central bank said labor conditions in advanced economies remained firm with domestic demand continuing to support growth in Asia.

―― The bank also said leading indicators point to “a softening of the near-term global economic outlook, with considerable downside risks remaining primarily from prolonged trade tensions.”

―― It said prospects for monetary easing in the major economies had somewhat eased global financial conditions, but noted that increased policy uncertainty could lead to excessive financial market volatility.

―― The bank projected economic growth supported by domestic demand with external sector performance weighed down by slower global growth and trade tensions.

Takeaway:

―― The bank’s baseline growth projection remained within the range of 4.3 percent to 4.8 percent, subject to downside risks from ongoing uncertainties in the global and domestic environment, worsening trade tensions and extended weakness in commodity-related sectors.

―― At the current level of the overnight lending rate, the bank described its monetary policy stance as remaining “accommodative and supportive of economic activity.” The rate cut in May was the first easing by the bank in nearly three years.

―― It said its Monetary Policy Committee will continue to “assess the balance of risks to domestic growth and inflation, to ensure that the monetary policy stance remains conducive to sustainable growth amid price stability.”