Bank Negara remains on hold post July’s surprise cut; policymakers await upcoming budget

The Malaysian central bank held fire at its monetary policy meeting held Wednesday, after unleashing a surprise rate cut in July, for the first time in seven years. Also policymakers are closely awaiting the upcoming budget next month to see if the government adopts any additional stimulus measures.

Bank Negara Malaysia (BNM) kept the overnight policy rate at 3 percent, on tap with market anticipation. Governor Muhammad Ibrahim had reduced the rate by 25 basis points in July, from as high as 3.5 percent after taking office, saying it was a deliberate move to ensure that the economy expands within the forecast range of 4- 4.5 percent this year.

In addition, consumer prices rose 1.1 percent in July from a year earlier, down from 1.6 percent in June. Also, central bankers are keen to witness the upcoming budget in October to see if the government adopts any additional growth stimuli, reports said.

"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 stable inflation, supported by continued healthy financial intermediation in the economy," the central bank said.

Meanwhile, the bank projected inflation to be at the lower end of the 2-3 percent range for this year and expects it to remain relatively stable in 2017, given the environment of low global energy and commodity prices, and generally subdued global inflation.