At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to leave the Overnight Policy Rate (OPR) unchanged at 2.00 percent.

The recovery in the global economy continues to gather pace, supported by continued expansionary economic policies, improved financial conditions and a strong rebound in several emerging economies. While the growth momentum in regional economies is expected to strengthen further in 2010, there remains uncertainty on the prospects for the advanced economies as growth continues to depend on policy stimulus measures, and the sustainability of private sector demand amid ongoing financial system resolution and reforms.

In the domestic economy, recent economic indicators suggest that the economy expanded favourably in the fourth quarter of 2009. Positive developments in manufacturing production, financing activity, external trade and labour market conditions reaffirm the assessment that the economic recovery is gaining strength. Going forward, the economy is expected to expand further in 2010, with growth being supported by strengthening domestic demand, particularly private consumption, and further improvements in external demand.

Inflation turned positive in December. The change largely reflects the lapse of the impact from the adjustment to retail fuel prices in 2008. The pace of price increase for the year is projected to be gradual, reflecting the prevailing economic conditions and taking into account some adjustments in administered prices. In the absence of further price revisions and external influences, a positive but modest inflation rate is expected in 2010.

Moving forward, monetary policy would remain accommodative to ensure that the economic recovery is well entrenched. At the same time, the MPC also recognizes the need to ensure that the stance of monetary policy is appropriate to prevent the build up of financial imbalances that could arise from interest rates being too low for a prolonged period of time.