Friday, November 12, 2010

BNM Stays On Hold

As expected, BNM stayed pat on the OPR at 2.75% for another meeting. The language of the press statement is about as unenlightening as…well, as a typical economist’s statement (excerpt; hit the link for the full statement):

Monetary Policy Statement

…The MPC considers the current level of OPR as appropriate and consistent with the latest assessment of the economic growth and inflation prospects. The stance of monetary policy continues to remain accommodative and supportive of economic growth. While domestic financial conditions remain orderly, greater vigilance will be accorded to the potential risks arising from large and volatile capital flows.

It tells you the obvious, and just about nothing else. That last line about greater vigilance provides no clues on what possible actions BNM might take if capital flows get too large or too volatile, which means all options are open.

The statement does say that domestic demand indicators for 3Q have been strong, which is some comfort to me because my quick and dirty forecast model says no growth.

It’s another two months and change until the next MPC meeting, but absent any further crisis erupting or some unexpected spurt of growth in the major economies, I don’t think we should expect another rate hike any time soon.

Capital flows are still the most proximate threat to monetary stability, so I’d expect a move on that front sooner than any change in the OPR.

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