Yesterday’s MPC decision came as no surprise, with the OPR held steady at 3.25% (excerpt):
At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 3.25 percent.
The global economic expansion remains moderate, with divergent growth momentum across economies in the first quarter of 2015…Downside risks to this outlook, however, continue to persist. In this environment, the international financial markets will continue to be affected by shifts in global liquidity and investors sentiments.
For Malaysia, latest indicators suggest that domestic demand has continued to support growth in the first quarter. Looking ahead, the prospects are for the Malaysian economy to remain on a steady growth path, with domestic demand remaining as the key driver of growth….
…For the rest of the year, headline inflation is expected to trend higher given the impact of the implementation of the GST…Underlying inflation is expected to remain contained amid the stable domestic demand conditions.
At the current level of the OPR, the stance of monetary policy remains accommodative and supportive of economic activity…While the risks of destabilising financial imbalances are contained, the MPC will continue to monitor these risks to ensure the sustainability of the overall growth prospects.
I think the important bit is that very last line, with the mention of financial imbalances, which basically signals that there won’t be a change in the policy interest rate for the foreseeable future, unless something really drastic comes up.
That doesn’t include a dip in growth in 2Q15 – we would expect to see a transitory drop in private consumption growth (or even a contraction) given the introduction of GST. I don’t think that would be enough to make the MPC change its minds.