Bank Ne­gara leaves key rate un­changed

> Ringgit drops fur­ther against US dol­lar, hits low­est level in 18 years

The Sun (Malaysia) - - MEDIA & MARKETING - BY EE ANN NEE

PETALING JAYA: Bank Ne­gara Malaysia (BNM) main­tained the Overnight Pol­icy Rate (OPR) at 3% at its Mone­tary Pol­icy Com­mit­tee meet­ing yes­ter­day, as widely ex­pected by most econ­o­mists.

Mean­while, the ringgit con­tin­ued on a weaker bias. The Malaysian cur­rency de­pre­ci­ated 0.53% to 4.4445 against the US dol­lar yes­ter­day, the low­est level in 18 years.

BNM said in a state­ment that at the OPR’s cur­rent level, the de­gree of mone­tary ac­com­moda­tive­ness is con­sis­tent with the pol­icy stance to en­sure that the do­mes­tic econ­omy con­tin­ues on a steady growth path amid sta­ble in­fla­tion, sup­ported by con­tin­ued healthy fi­nan­cial in­ter­me­di­a­tion in the econ­omy.

Just two weeks af­ter Don­ald Trump’s shock vic­tory in the US pres­i­den­tial elec­tion, the ringgit has con­tin­ued to plunge, while out­flows from the bond mar­ket ex­ac­er­bated the weak­ness in the cur­rency as in­vestors re­duced their po­si­tions on the Malaysian front.

The cen­tral bank said the ringgit, along with most other emerg­ing mar­ket cur­ren­cies, has ex­pe­ri­enced sharp ad­just­ments and sig­nif­i­cant volatil­ity due to con­tin­u­ing un­cer­tain­ties in the global eco­nomic and pol­icy en­vi­ron­ment, and geopo­lit­i­cal de­vel­op­ments. These fac­tors could re­sult in pe­ri­ods of volatil­ity in the re­gional fi­nan­cial and for­eign ex­change mar­kets.

“In this re­gard, BNM will con­tinue to pro­vide liq­uid­ity to en­sure the or­derly func­tion­ing of the do­mes­tic for­eign ex­change mar­ket. The cap­i­tal mar­ket re­mains ac­ces­si­ble, deep and liq­uid. Bank­ing sys­tem liq­uid­ity is am­ple. Fi­nan­cial in­sti­tu­tions con­tinue to op­er­ate with strong cap­i­tal and liq­uid­ity buf­fers and the growth of fi­nanc­ing to the pri­vate sec­tor is con­sis­tent with the pace of eco­nomic ac­tiv­ity,” BNM said.

It added that while the prospect of a shift to­wards pro­gres­sive use of fis­cal pol­icy in the de­vel­oped economies could lead to a more bal­anced pol­icy en­vi­ron­ment that would sup­port growth go­ing for­ward, there is un­cer­tainty aris­ing from risks of pro­tec­tion­ism and fi­nan­cial mar­ket volatil­ity.

“Height­ened fi­nan­cial mar­ket volatil­ity in re­cent weeks has had an ad­verse ef­fect on var­i­ous as­set classes, ex­change rates and yields across many emerg­ing economies. Global fi­nan­cial mar­ket con­di­tions are likely to be sus­cep­ti­ble to pol­icy and mar­ket de­vel­op­ments,” said BNM.

OCBC Bank econ­o­mist Wel­lian Wi­ranto said at this stage, the ringgit car­ries the un­for­tu­nate moniker of be­ing one of the worst-per­form­ing Asian cur­ren­cies since the US elec­tion.

He said the re­cent global cur­rency volatil­ity would likely have played into BNM’s con­sid­er­a­tion when it opted to keep the OPR un­changed at 3%.

“Like most of us, the cen­tral bank ap­pears to be grasp­ing for a sense of how a Pres­i­dent Trump would shape the global growth out­look and the im­pli­ca­tions for Malaysia’s own econ­omy, and there­fore its pol­icy rate path,” Wel­lian said.

He added that it re­mains un­likely that BNM will be com­fort­able eas­ing the OPR at the next meet­ing of the Mone­tary Pol­icy Com­mit­tee on Jan 18 and 19 next year.

“There is a very lit­tle chance to see BNM open­ing 2017 with a rate cut, but prob­a­bly the mar­ket would have ad­justed well to the even­tu­al­ity by the time BNM meets again in early March for it to pro­ceed with eas­ing once more.”

Wel­lian said that if the al­ready-tepid global trade flows be­come fur­ther crimped next year due to tar­iffs or even threats of them, Malaysia would rank as one of the more highly im­pacted.

A worker at a money changer’s out­let count­ing cur­rency notes. The ringgit has seen sig­nif­i­cant volatil­ity since Don­ald Trump’s win in the US pres­i­den­tial elec­tion.

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.