BNM maintains its growth outlook, policy remains accommodative

In line with the policy statement, BNM clearly signaled in its annual report that the monetary policy stance remains sufficiently accommodative for Malaysia's economy. On growth, BNM expects private investment to remain resilient, growing by 9.0% in 2015, versus 11.0% in 2014. 

BNM also expects some moderation in private consumption due to the introduction of the GST, with growth expected to slow to 6.0%, from 7.1% in 2014.  

While its inflation forecast has been reduced, BNM has flagged that inflation will likely trend higher over rest of the year, as per GST implementation in April. But inflation will remain below its historical average and is unlikely to affect the monetary stance, as underlying inflation should remain contained. 

On the MYR, Governor Zeti noted that while the central bank does not seek to defend any particular levels, the currency is 'significantly undervalued'. Today's report indicates to us that BNM does not see any immediate deflation or growth risks in the economy.

Barclays Bank notes as follows in a report on Wednesday:

• We believe Bank Negara remains comfortable with the growth outlook, as it has maintained its 2015 growth forecast of 4.5-5.5%. However, to account for lower oil prices, BNM has downgraded its assessment of inflation, expecting it to average 2-3% in 2015, from 4-5% earlier. 
  
  
• We forecast 2015 GDP growth at 4.5%, and expect inflation to average 2.1%.