Saturday, November 12, 2011

Monetary Policy On Hold: No Surprise

The Committee’s looking forward, not back (excerpt):

Monetary Policy Statement

At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 3.00 percent.

Latest indicators suggest that the global growth momentum has moderated in recent months…

…The domestic economy improved in the third quarter, due primarily to stronger domestic demand…Looking ahead, the weaker external environment could, however, impact the overall growth prospects…

…Going forward, inflation is expected to remain stable for the rest of the year and moderate in 2012…High food price inflation, largely due to supply disruptions, continues to remain a concern.

In the MPC's assessment, the global economic outlook is expected to be weaker and international financial market conditions will remain highly uncertain and volatile going forward…

Everybody’s looking at the same data and coming up with more or less the same conclusions – the threats to growth are rising, so there’s no cause for tightening monetary conditions even if other indicators like inflation suggest otherwise. Yet, for the same reasons, there’s no point in being panicky and cutting rates when the economy is showing signs o picking up.

Given how rapidly things are deteriorating in Europe though, don’t be surprised by a swift response if things show signs of falling apart. The next meeting of the MPC will be at the end of January, but we’ve luckily a central bank Governor who isn’t afraid of bold moves when necessary.

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