Report: Monetary policy stays accomodative to sustain nation's economic growth

KUALA LUMPUR: Malaysia's monetary policy remains accommodative, focused on supporting sustainable growth of the economy in an environment of price stability.
The Finance Ministry said as Malaysia's growth is underpinned by strong external demand and resilient domestic activities, the policy stance is to mitigate any potential vulnerabilities arising from financial imbalances.
"With the firm growth prospects and inflation expected to remain above the long-run average, the overnight policy rate (OPR) was increased by 25 basis points to 3.25% on July 10 this year, however the statutory reserve requirement (SRR) was maintained at four%.
"The normalisation of monetary conditions was also aimed at mitigating the risk of broader economic and financial imbalances that could undermine the growth prospects of the economy," says the Finance Ministry in its Economic Report 2014/2015 released today.
The report is released in conjunction with the tabling of Budget 2015 in Parliament today by Prime Minister Datuk Seri Najib Abdul Razak, who is also Finance Minister.
At the new level of the OPR, the report said the monetary policy stance remains supportive of economic activities.
When the OPR increased to 3.25%, the real return on fixed deposits of 9-month and 12-month maturities turned positive as the inflation rate in July moderated to 3.25%.
The report said monetary aggregates expanded further on the back of strong economic activities during the first seven months of 2014.
The ringgit initially depreciated before strengthening for most of the period between January to August 2014.
It eased 1.9% to 3.3460 against the US dollar following the US Federal Reserve (Fed) reiterating its plan for a stimulus cut and moderation in China's economy, which dampened investors' demand for emerging market assets.
On the other hand, the ringgit's improved performance was due to the better-than-expected first and second quarter Gross Domestic Product (GDP), expectations of another OPR hike, a gradual reduction of quantitative easing by the Fed, as well as better regional growth prospects, which sustained investor interest in the regional financial market. – Bernama