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Wednesday November 25, 2009

Bank Negara leaves benchmark interest rate unchanged


PETALING JAYA: Bank Negara has decided to keep the benchmark interest rate – the overnight policy rate – unchanged at 2% as inflation remained benign in October and economic recovery continued apace. The central bank’s decision confirmed a number of analysts’ expectations.

Morgan Stanley Research said policy hikes were expected to begin from the second-quarter of next year “with a cumulative raise of 200 basis points by 2010 year-end”.

Bank Negara said in a statement following the monetary policy committee meeting yesterday that domestic economic conditions continued to improve while price pressures and inflation expectations were expected to remain contained going forward.

It said “the current monetary policy stance is appropriate and will continue to provide support for economic activity.”

Bank Negara said the latest indicators continued to signal further improvements in the international and financial conditions with economic activity in the advanced economies showing broader signs of recovery supported by the impact of policy measures.

“While these positive developments are expected to continue going into 2010, the recovery is likely to be gradual and uneven, with the outlook remaining uncertain once the effects of the policy support begin to diminish,” it added.

Bank Negara said the domestic economy’s pace of recovery was gaining momentum with domestic demand in the form of private consumption and public sector spending to provide support for growth.

“Inflation is expected to turn positive in the coming months, as domestic economic conditions strengthen,” it said, adding that inflation for October continued to decline at a slower rate and expected to remain modest in 2010.


For Bank Negara statements click here

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