At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 2.75 percent.

Growth in the global economy has moderated in the third quarter, with a sustained divergence in the growth performance of the advanced and emerging economies. In the region, the recovery continues, although the pace of economic growth has moderated arising from a weakening of external demand. International financial market conditions have become more volatile with increased capital flows to emerging markets. This shift in global liquidity has brought with it risks to macroeconomic and financial stability in the emerging market economies.

In the Malaysian economy, recent indicators on exports and external-related sectors affirmed the earlier expectations for growth to moderate in the third quarter. Nevertheless, domestic demand has provided strong support to growth. Going forward, overall growth will continue to be well supported by domestic economic activity. Private consumption will benefit from the favourable employment conditions, firm commodity prices and accommodative financing environment, while the expansion in private investment is expected to be driven by increased capital spending in the domestic-oriented sectors.

Domestic headline inflation moderated in September to 1.8%. Prices are expected to rise at a modest pace in the coming months in view of the rising global commodity and food prices. Inflation is however expected to remain moderate going into 2011.

The MPC considers the current level of OPR as appropriate and consistent with the latest assessment of the economic growth and inflation prospects. The stance of monetary policy continues to remain accommodative and supportive of economic growth. While domestic financial conditions remain orderly, greater vigilance will be accorded to the potential risks arising from large and volatile capital flows.

The meeting also approved the schedule of MPC meetings for 2011. In accordance with the Central Bank of Malaysia Act 2009, the MPC will convene six times a year. The Monetary Policy Statement will be released at 6 p.m. on the same day as the MPC meeting.