MNI STATE OF PLAY: Malaysia Cites Ukraine In Steady Rates Call

Malaysia’s central bank has cited new uncertainties over the Russian invasion of Ukraine and the risk to global growth and commodity prices in its decision to leave its Overnight Policy Rate unchanged at 1.75% on Thursday.

Bank Negara Malaysia’s statement said that although the domestic economy grew by 3.1% in 2021 and would likely strengthen this year with moderate headline inflation, it was appropriate for monetary policy to be accommodative “amid the prevailing uncertainties,” see: MNI STATE OF PLAY: Malaysia Recovers, Watches Inflation.

“Risks to the growth outlook remain titled to the downside due to external and domestic factors,” BNM said.

Malaysian inflation was 3.2% in the year to December, and the central bank is understood to have a target range of between 1% and 3%. However, BNM expects inflation to remain moderate in 2022 as the base effect from fuel inflation continues to dissipate and underlying inflation normalises at its long-term average.

Although the economy was strengthening with the re-opening of international borders and some supply chain pressures would ease, BNM noted the potential for the Ukraine conflict to create financial market volatility.

Given these uncertainties, the bank said it would await new data and the implications of the global risks on domestic inflation and growth.

The policy rate has been unchanged since the last cut in September 2020.