KUALA LUMPUR (March 5): Bank Negara Malaysia's Monetary Policy Committee (MPC) has decided to keep the overnight policy rate (OPR) at 3.25% at its meeting today, as it anticipates that Malaysia's growth would be sustained in 2019 with continued support from private sector spending, while inflation would remain low in the immediate term.

It also sees stable labour market conditions and capacity expansion in key sectors to continue to drive household and capital spending, though support from the external sector is expected to soften in tandem with 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," the central bank said in a statement.

It said this after noting that global growth momentum has been slowing with unresolved trade tensions remaining a key source of risk that is affecting global trade and investment activities.

"Tighter global financial conditions and elevated political and policy uncertainty could lead to financial market adjustments, further weighing on the overall outlook," it added.

Inflation restrained by policy measures
In terms of inflation, the central bank said it is expected to remain low in the immediate term mainly due to policy measures that 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," it said.

Hence, the central bank is of the view that "at the current OPR level, the degree of monetary accommodativeness is consistent with the intended policy stance".

"Recognising that there are downside risks in the economic and financial environment, the MPC will continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation," it added.