BNM remains dovish, besides being on hold

Bank Negara Malaysia sees the country's positve growth in financial intermedation and in financing. This leads the bank to be comfortable with the conditions, however, when compared to the previous statement , there were fewer changes to this one.

Malaysia's policy rate was unchanged by the BNM, which was as predicted. The monetary conditions are likely to be kept stable by the bank. the important change in the statement was external growth assessment. The central bank now sees this as a major risk ahead.

The downside risks to the country's economy were also focused in the statemet, which are caused mainly from the environment of external growth, though it remains modest. In most parts of Asia, the growth has been slowed down, but stable domestic demand continue to benefit activity levels.

The GDP growth in Malaysia, as highlighted by BNM, in 2015 is likely to be 4.5-5.5%, slowing to 4.0-5.0% in 2016. Weak external environment and some moderation in private consumption cause this, on a higher cost of living and increased economic uncertainty. BNM sees inflation peaking in Q1 2016, but expects prices to be higher in 2016 relative to 2015.

"However, underlying domestic growth will remain supported by low unemployment, wage growth and infrastructure projects. The bank's guidance for its monetary stance is unchanged. BNM remains moderately dovish, with risks largely centering around the external growth environment", says Barclays.