KUALA LUMPUR (July 9): Bank Negara Malaysia (BNM) announced that it has maintained the overnight policy rate (OPR) at 3.25% during the Monetary Policy Committee (MPC) meeting today.

In a statement, the central bank said the stance of monetary policy remains accommodative and supportive of economic activity at the current OPR level.

BNM expects the Malaysian economy to continue expanding at a more moderate pace in the second quarter, driven by domestic demand.

It forecasts slower growth in private consumption, due to frontloading of consumption ahead of the goods and services tax (GST) implementation in April.

“While households are expected to continue adjusting to the GST in the immediate future, overall spending will be supported by continued wage growth and stable labour market conditions,” it said.

BNM added that investment activities are projected to be driven by capital spending in the manufacturing and services sectors and infrastructure projects, offsetting the weaker performance of the external sector.

Meanwhile, it expects headline inflation to be higher moving forward, due to the GST and the adjustments to domestic fuel prices. It anticipates inflation to moderate towards the latter half of 2016 and remain contained amid stable domestic demand conditions.

On the ringgit, BNM said there is still ample liquidity in the domestic financial system, despite the currency being affected by recent global and domestic developments.

“The financial institutions are also operating with strong capital and liquidity buffers. Access to financing has continued with credit growth remaining at healthy levels. Financial intermediation has therefore continued to support the economy,” it said.

Meanwhile, BNM sees increased downside risks for the global economy, despite recovery in global growth.

“International financial markets have also become more volatile following increased concerns over developments in Europe and continued policy uncertainties in several major advanced countries. There are also downside risks to growth in the major Asian economies,” said BNM.

However, it said the global economy continues to expand at a moderate pace, with advanced economies posting moderate growth, while growth in most of Asia are supported by domestic demand.