BNM Watch: OPR Maintained At 3%

Not exactly an anti-climax, but pretty close (excerpt; emphasis added):

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.

In the recent months, global economic and financial conditions have deteriorated following the escalation of the sovereign debt crisis in Europe, the ongoing fiscal consolidation and the significant policy uncertainties...These conditions pose downside risks to global growth. In Asia, while growth continues to be supported by sustained domestic demand, the growth momentum has moderated amid the weaker external environment.

In the domestic economy, the latest indicators point towards continued expansion in the fourth quarter of 2011...Looking ahead, the economy is expected to continue to expand, underpinned by sustained private sector economic activity and further reinforced by public sector spending...Overall growth prospects, however, would be affected by the slowdown in external demand, resulting in slower growth in exports and industrial production...

...Going into 2012, the assessment is that cost-push inflation will moderate as slowing global economic activity will alleviate the pressure on the prices of key commodities...Nevertheless, risks to inflation could emerge arising from supply disruptions that would result in higher food and commodity prices.

In the MPC's assessment, the global environment will become more challenging going forward. As Malaysia's economic growth and inflation prospects will be affected by these external developments, the MPC will continue to assess carefully the risks to domestic growth and inflation.

Nothing here that we don’t already know, but the change in the language is suggestive of the thinking in the MPC. The statement from the last (Nov 11) meeting’s concluding lines read (emphasis added):

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. While the domestic economy is expected to expand, these external developments could affect the overall growth prospects of the Malaysian economy. The MPC will continue to monitor these developments and assess the risks to the outlook for domestic growth and inflation.

Compare that to the “will become more challenging going forward” phrase from today’s statement. I think on balance the chances of a rate cut at the next meeting just went up.