Cautious View from Bank Negara

At its meeting on 28 October, Bank Negara has decided to leaves the overnight policy rate (OPR) unchanged at 2%.

In a statement yesterday, Bank Negara said the outlook for the global economy continued to be uncertain, with recovery likely to be slow and uneven in view of the ongoing adjustments.

However, in the domestic economy, stronger evidence had emerged to suggest conditions were improving and a recovery in economic activity was gaining some strength, the central bank said.

“These improvements are more broad-based and are reflected in stronger labour market conditions, consumer and business sentiments, industrial production, financing activity and external trade.

“These positive developments are expected to continue into 2010, with growth in the domestic economy expected to continue to be supported by existing policy measures and the growing confidence in the private sector,” it said.

Bank Negara said with improving domestic economic conditions, and as price pressures and inflationary expectations expected to remain contained going forward, the assessment is that the current monetary policy stance was appropriate and would continue to provide support to economic activity.

Bank Negara said consumer prices declined at a slower rate in September. It said the decline in prices largely reflected the cumulative fall in fuel prices since June 2008 and the easing pressure on food prices.

“The decline in consumer prices, however, is expected to be temporary. Excluding further unanticipated price adjustments and external influences, inflation in 2010 is projected to be positive but remain subdued,” it added.

I guess the "feel good" sensations for the local economy are yet to be felt and caution rules the the minds of these central planners that savers' interests should still be sacrificed for the interest of business!