Malaysia Keeps Rate at 3.25% Amidst slow external demand, Weak Ringgit

Malaysia central bank kept the country's overnight policy rate unchanged at 3.25 percent Thursday amid slow external demand and weak ringgit.

Nikkei Asian Review reported the decision came after the Bank Negara Malaysia reported its economic assessment that growth is slow due to weak external demand. The downward curve in commodity prices has adversely affected exports such as gas, oil, and palm oil. The volatility in commodity prices imposes great risk to growth. Domestic spending, especially investment from the manufacturing and services sectors will be the growth driver.

However, private consumption could slow down since households are adjusting to the higher cost of living in an uncertain economic environment. Meanwhile inflation increased by 2.6 percent on year in September. Inflation is also expected to increase early in 2016.

According to Bloomberg Business, the ringgit went down 0.7 percent to 4.2965 a dollar Thursday. Meanwhile, the government projects the gross domestic product to grow by 4 percent to 5 percent in 2016. . According to Bank Negara, monetary policy is still accommodative and supportive on economic activities based on the level of interest rates at present.

The Bank Negara Malaysia said, "The committee recognizes that there are heightened risks in the global economic and financial environment. These risks are being carefully monitored to assess their implications on macroeconomic stability and the prospects of the Malaysian economy.", as reported by The Edge Markets.

Prime Minister Najib Razak pledged to boost consumption, encourage private investment, and speed up selected infrastructure projects in 2016. Meanwhile, China and Singapore, which are both Malaysia's biggest trading partners, have eased monetary policy in the past several weeks. These nations are limited by a currency that has depreciated by as much as 19 percent in 2015.Meanwhile, according to central bank Governor Zeti Akhtar Aziz said in October 11 that growth could decrease to 4.8 percent in 2015 due to risk of a slowdown brought by a bigger threat that is the global economy.