KUALA LUMPUR: Bank Negara Malaysia has maintained the country’s key interest rate at 3.25 per cent in anticipation of stronger domestic demand.
The central bank said Malaysia’s strong growth performance in the fourth quarter of last year continued to be anchored by private sector spending.
“Looking ahead, growth prospects will be sustained by the positive global growth outlook and spillovers from the external sector to the domestic economy.
“Domestic demand will remain the key driver of growth, underpinned by favourable income and labour market conditions, spending on new and ongoing infrastructure projects and sustained capital investment by firms in the manufacturing and services sectors.
“With additional impetus from the external sector, growth is expected to remain strong in 2018,” it said in a statement today.
“Inflation is projected to average lower in 2018, on expectations of a smaller effect from global cost factors,” it added.
Bank Negara said a stronger ringgit exchange rate this year will mitigate import costs.
Global energy and commodity prices are expected to trend higher in 2018, but at a more moderate pace relative to the previous year.
“However, the trajectory of headline inflation will be dependent on future global oil prices which remain highly uncertain,” it said.
Bank Negara said underlying inflation, as measured by core inflation, is also projected to moderate due to improving labour productivity and ongoing investments for capacity expansion.
The domestic financial markets, it said, had been resilient.
The broad appreciation of the ringgit in the past year better reflects the economic fundamentals.
“Banking system liquidity remains sufficient with financial institutions continuing to operate with strong capital and liquidity buffers.
“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 lower inflation,” it said.