The central bank said in a statement that the degree of monetary accommodativeness is consistent with the intended policy stance at the current level of the OPR.
“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 said.
Headline inflation in January 2019 was at negative 0.7%, due mainly to negative transport inflation at 7.8% arising from lower global oil prices while underlying inflation, as measured by core inflation remained stable at 1.5% in January 2019 reflecting sustained demand conditions.
BNM expects inflation to remain low in the immediate term mainly due to policy measures, such as 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, it expects average headline inflation 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.
OCBC Bank economist Alan Lau believes BNM will probably hold the OPR at 3.25% for the first half of 2019.
“If a cut is to happen, we see it coming only in the second half of 2019.”
BNM said that global growth momentum is showing signs of moderation amid slowing growth in most major advanced and emerging economies, and going forward, unresolved trade tensions remain a key source of risk, affecting global trade and investment activities.
It said the tighter global financial conditions and elevated political and policy uncertainty could lead to financial market adjustments, further weighing on the overall outlook.
“The Malaysian economy grew at a more moderate pace of 4.7% in 2018. Looking ahead, growth is expected to be sustained in 2019 with continued support from private sector spending. Stable labour market conditions and capacity expansion in key sectors will continue to drive household and capital spending,” it said.
BNM said support from the external sector is expected to soften, in tandem with the moderating global growth momentum and 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,” it added.
Source: The Sun Daily