Thursday 28 Mar 2024
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KUALA LUMPUR: Bank Negara Malaysia (BNM) governor Tan Sri Dr Zeti Akhtar Aziz said the central bank is not concerned that Malaysia’s inflation could dip into negative territory after January’s number came in slightly lower.

The Edge Financial Daily reported yesterday that local economists had lowered their inflation forecasts for 2015, as the country’s inflation, as measured by the consumer price index (CPI), had slowed to a five-year low of 1% in January 2015, from 2.7% in December 2014, driven by cheaper fuel prices which led to lower transport costs.

CIMB Research revised its inflation estimate for 2015 to 2.7% from 4%, Maybank Investment Bank Research revised its forecast to range between 3% and 4% from 4% previously, AllianceDBS Research revised its 2015 CPI target to 3.5% from 4%, and JF Apex Research lowered its 2015 target to 3.8% from 4.2% previously.

BNM is expected to release its CPI forecast, together with its annual report, on March 11.

Zeti also believes that the ringgit is currently undervalued but expects that it will reflect the country’s underlying fundamentals over time.

“At this point, [the fundamentals have] manifest themselves in steady growth in the region of 5%,” she told reporters after the launch of the Maybank Islamic Shariah Centre of Excellence yesterday.

“The current monetary policy is accommodative and remains so at this point in time. We will continue to evaluate the risks to inflation and growth,” she said.

At the time of writing, the ringgit was trading at RM3.6330 against the greenback.

As for Malaysia’s sovereign debt rating, Zeti said she hoped for a fair assessment by rating agencies, based on Malaysia’s strong underlying fundamentals.

“We have a strong financial system, the economy is on a steady growth path, there is a current account surplus, low levels of unemployment, lower level of external debt, and higher level of reserves. I hope the ratings agencies do take these factors into account,” she said.

Moody’s Investors Service reaffirmed its A3 rating on government bond and issuer ratings on Jan 30, while both Fitch Ratings and Standard & Poors both have an A-rating on Malaysia.

Meanwhile, Zeti said she was not aware of any loan agreements between the government and foreign parties in relation to 1Malaysia Development Bhd.

“I do not comment on individual cases, and I am not aware of any such loan given by the government to a foreign company,” she said.

The central bank governor was asked about a whistleblower’s report online related to an agreement signed between 1MDB and Petrosaudi Holdings (Cayman) Ltd — a subsidiary of Saudi Arabia’s Petrosaudi International Ltd — in 2009, in which 1MDB paid US$1 billion of borrowed public money into a joint venture company (1MDB Petrosaudi Ltd) which already carried a US$700 million debt.

 

This article first appeared in The Edge Financial Daily, on February 25, 2015.

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