In the US, a lot of people pay a lot of attention to what the Federal Open Market Committee (FOMC) has to say. In Malaysia, I do not feel that atmosphere whatever the Monetary Policy Committee (MPC) convenes. Partly because of that, the Malaysian economic scene is so boring compared to the US. The local economic discourse is limited to populism and hardly receives the academic attention economic news receive in the US. So, let us try to create that atmosphere here instead of complaining what a boring country we have. Be proactive baby!
First off, the MPC seems to have a template for the announcement regarding the overnight lending policy. If I may add, just like the FOMC. The first paragraph goes straight to the point.
In May:
At its meeting today, Bank Negara Malaysia’s Monetary Policy Committee (MPC) decided to leave the Overnight Policy Rate (OPR) unchanged at 3.50 percent. [Monetary Policy Statement. Bank Negara. May 28 2007]
In July:
At its meeting today, Bank Negara Malaysia’s Monetary Policy Committee (MPC) decided to leave the Overnight Policy Rate (OPR) unchanged at 3.50 percent. [Monetary Policy Statement. Bank Negara. July 24 2007]
So it stays. What a boring comment. They need to put in some spice into it, put in some mystery, like what Greenspan did, you know?
The second paragraph talks about Malaysian economic growth in general.
In May:
Despite the less favourable external environment which has had a moderating effect on Malaysia’s export growth, strong domestic demand has sustained the growth of the Malaysian economy. The public sector has also had an important positive impact on domestic economic activity. The Malaysian economy is therefore expected to sustain steady growth over the medium term. [Monetary Policy Statement. Bank Negara. May 28 2007]
In July:
The overall growth of the Malaysian economy in the first half of the year has remained favourable with the slower growth in the external sector being balanced by stronger growth in domestic demand. During the second half of 2007, the growth momentum of the economy is expected to strengthen. Recent trade data suggest that the sustained growth in Malaysia’s major trading partner economies is starting to provide support to export growth. This will complement the robust growth in both domestic consumption and investment that is expected to be sustained for the rest of the year. [Monetary Policy Statement. Bank Negara. July 24 2007]
The July statement seems to be more bullish in future prospect of the export component of the GDP. Concerning the export component, I wonder if it is caused by diversification. Also, I could not help but notice the word “public sector” in the May statement. That “public sector” probably refers to government spending. I also wonder if that “domestic demand” is caused by government spending.
Next paragraph clearly talks of the greatest enemy of most central bankers: inflation.
In May:
Inflation during the first four months of 2007 averaged 2.4% and has continued its downward trend. Going forward, the continued high prices of commodities and agricultural products, and the rise in global food prices could have implications for domestic food prices and overall inflation. Taking into account these developments and the low inflation prevailing currently, the expectations are that the average rate of inflation for 2007 would be within the projected range of 2-2.5 percent. [Monetary Policy Statement. Bank Negara. May 28 2007]
In July:
Inflation moderated in the first half of 2007 to a level of 1.4% in June and averaged 2% for the period as a whole. During the second half of 2007, inflation may edge up due to both domestic and external factors, but the average rate of inflation for 2007 is expected to be at the lower end of the projected range of 2-2.5 percent. [Monetary Policy Statement. Bank Negara. July 24 2007]
Considering the second as well as third paragraph of the July statement, it sounds like the policymakers are confused. Good, bad, going up, going down… Maybe, the word guarded celebration is in order. Or maybe, neutral bias?
I feel like they are mirroring their counterparts at the Federal Reserve, with a hint of oxymoron.
The last paragraph tries to describe the future.
In May:
Given the medium term outlook for inflation and economic growth, the current level of the policy rate remains appropriate. In view of the uncertainty in the external environment, developments in the international economy would be monitored closely. The future stance of monetary policy would be determined by Bank Negara Malaysia’s assessment of new data and information and its implications on the prospects for price stability and economic growth. [Monetary Policy Statement. Bank Negara. May 28 2007]
In July:
The future stance of monetary policy would be determined by Bank Negara Malaysia’s assessment of new data and information and their implications on the medium-term prospects for price stability and economic growth. [Monetary Policy Statement. Bank Negara. July 24 2007]
In May, the confusion is pronounced. In July, the explicit signal for uncertainty is gone. Odd. Does that mean Bank Negara feels the economy is growing at a good pace while inflation is comfortably low?
