Statement by the Bank Negara Malaysia:
The global growth momentum has continued to be modest. Latest economic data suggests that the recovery is uneven while downside risks to global growth prospects remain. Growth in the major advanced economies continues to be constrained by ongoing fiscal consolidation, slow recovery in financial intermediation and weak labour market conditions. In Asia, while growth has been affected by the weak external environment, domestic demand continues to support growth. Despite the improvements in international financial market conditions, markets remain vulnerable to setbacks and changes in sentiments.
In the Malaysian economy, while the external sector is affected by global developments, domestic demand has continued to provide support to growth. Investment activity and private consumption have remained firm. Going forward, the domestic economy is expected to sustain a steady growth. Private consumption is supported by sustained income growth amid stable labour market conditions, while investment activity is being led by capital spending in the domestic-oriented sectors, and progress in the implementation of infrastructure projects.
Inflation remained low at 1.5% in the first quarter. While inflation is expected to continue to rise during the year, it is projected to remain modest. Domestic supply and cost factors are expected to contribute to higher prices. Externally, the risk of weather-related supply disruptions remains and could raise global food prices. Nevertheless, given the modest global growth prospects, pressures from global commodity prices are likely to be contained.
The Monetary Policy Committee considers the current stance of monetary policy to be appropriate given the outlook for inflation and growth. In addition to domestic conditions, the Monetary Policy Committee will continue to carefully assess the global economic and financial developments and their implications on the overall outlook for inflation and growth of the Malaysian economy.