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At the Monetary Policy
Committee (MPC) meeting today (13/05/2010), Bank Negara Malaysia decided
to raise the Overnight Policy Rate (OPR) by 25 basis points to 2.50
percent. The floor and ceiling rates of the corridor for the OPR are
correspondingly raised to 2.25 percent and 2.75 percent respectively.
The global economy registered a stronger than expected recovery in the
first quarter, underpinned by favourable growth performance in emerging
market economies and some of the advanced economies. Policy initiatives
and improvements in financial conditions have continued to support the
economic recovery in many countries. While economic activity in the
advanced economies has generally improved, growth in these economies is
still expected to remain modest. Considerable uncertainties remain due
to heightened concerns over the sovereign debt problems in Europe and
the expected diminishing effects of fiscal policy support. In the
emerging market economies, in particular Asia, growth is expected to be
stronger, supported by robust domestic demand and increased
intra-regional trade.
In the domestic economy, the strong and broad-based growth of 10.1% in
the first quarter affirms that economic recovery is firmly established.
Going forward, growth will be supported by continued expansion in
domestic demand and the improvement in external demand, especially from
the region. However, despite this upside potential to growth, there are
uncertainties arising from recent developments in the international
financial and economic environment.
Domestic inflation recorded a modest increase during the first quarter
and will continue to experience a gradual rise during the year, in line
with broad-based improvements in economic activity and taking into
account possible adjustments in administered prices. Although external
factors, including rising global commodity and food prices, may exert
some additional upward pressure on domestic prices, overall inflation is
expected to remain moderate in 2010.
The MPC decided to adjust the OPR towards further normalisation of
monetary conditions. At the new level of the OPR, the stance of monetary
policy continues to remain accommodative and supportive of economic
growth.
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