This article first appeared in The Edge Financial Daily, on March 24, 2016.

KUALA LUMPUR: Bank Negara Malaysia (BNM) said its monetary policy this year would ensure sustainability of the nation’s economic growth and stable consumer prices.

In its 2015 annual report, BNM said its monetary operations would also take into account external capital flow volatility. It would also ensure sufficient liquidity in the domestic financial system.

“Monetary policy in 2016 will focus on ensuring monetary conditions remain supportive of the sustainable growth of the domestic economy with price stability.

“This is against a challenging policy environment, characterised by the expectation of more moderate domestic growth, higher headline inflation and a high degree of uncertainty in the global and domestic environment,” said BNM.

There were downside risks to global economic growth due to weakness in advanced and emerging economies. Energy and commodity price uncertainty and anticipation of volatility in world financial markets are also crucial factors to look at.

“The implications of these developments on the domestic growth and inflation outlooks will be closely monitored during the year.

“In addition, monetary policy will also continue to consider the risk of financial imbalances,” said BNM.

Malaysia’s 2016 inflation, as measured by the consumer price index (CPI), is expected to be higher at 2.5% to 3.5%. The CPI rose 2.1% in 2015.

The 2016 inflation forecast took into account price adjustments of “several price-administered items” and the weaker ringgit. “The trajectory of inflation, however, could be more volatile as it is subject to uncertainties such as those relating to global growth, global oil prices and the ringgit exchange rate,” said BNM.