KUALA LUMPUR: Bank Negara Malaysia (BNM) said its monetary policy this year will consider the impact of tamer inflation and downside risks to world economic growth.

It said the potential divergence in monetary policies of major economies such as the United States, Europe and China would also influence Malaysia’s monetary stance.

“Monetary policy in 2015 will focus on ensuring steady growth of the Malaysian economy amid contained risks to inflation. The operating environment for monetary policy will be shaped by a number of factors including external developments that would affect the overall outlook for the domestic economy,” it said. 

“These include the considerable downside risks to the global growth prospects, the implications of a changed outlook for commodity prices, and the potential divergence in the monetary policies of the major economies,” it added.

BNM said inflation is deemed contained this year as cheaper crude oil translates into lower domestic fuel prices.

Its headline inflation forecast is lower at between 2% and 3% this year. This compares with the 3.2% recorded in 2014.  

“Going forward, the inflation rate could be subject to the volatility in global oil prices. Nevertheless, underlying inflation is expected to remain contained amid the stable domestic demand conditions,” the central bank said.

Economic growth risk will be a greater concern for the central bank. It sees risks to the growth outlook for the Malaysian economy emanating mainly from the external environment.

BNM said the decline in commodity prices has raised concerns over growth prospects for net commodity exporters like Malaysia.

“Against a backdrop of continued uncertainty in the global economic and financial landscape, the key risks to the growth outlook for the Malaysian economy will therefore emanate mainly from the external environment.”

This article first appeared in The Edge Financial Daily, on March 12, 2015.