KUALA LUMPUR, Nov 14 — The current monetary policy is still sufficient to provide an important support to economic growth and will not be modified unless a significant change in relevant condition occurs, Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz said.

She said even if a policy response was required, which is not currently the case, “there are other policy measures”.

“We are in an economy that doesn’t rely solely on interest rate policy either to promote growth or address inflation,” she was quoted in an interview with financial news agency, Market News International, in Switzerland Tuesday.

She said although inflation is going to increase, a number of factors would ensure that the rise is only temporary, so that Malaysian monetary authorities are not presently concerned about the outlook for price stability.   

“Right now, interest rates are accommodative and this provides important support for growth,” she said.

Last week, the central bank left the overnight policy rate at three per cent, where it has been since May 2011, until the next monetary policy meeting which is scheduled in January.

Zeti declined to respond to speculation that the next move could be a hike, and did not give any explicit signal as to future policy actions.

“I don’t believe that uncertainty has lessened since September’s Monetary Policy Committee meeting.

“Even though global growth has improved, which is a positive sign, there is still uncertainty and this recovery is still vulnerable to setbacks,” she said.

Zeti said the central bank wanted to promote price stability in an environment of sustainable growth and changes would only be made if conditions evolve to warrant it.

“This is a period of uncertainty. We don’t intend to provide the kind of forward guidance for our policies that others have given; policy will be based on our assessment of risks going forward.

“Bank Negara is essentially in a wait-and-see mode for now,” she added.

Zeti anticipated the inflation would rise and could even increase to above long-term average of 3.2 per cent next year as the government reduces fuel subsidies.

However, she said the effect is envisaged to be temporary and is not something the central bank is concerned about.

She said the likely absence of demand pressures in the context of modest growth, to a stable external price environment and to a “significant” expansion of productive capacity as investment recovers would buffer the impact of the fuel subsidy removal.

On economic outlook, Zeti said as improved exports flank stable domestic demand, growth in the second half of the current year will pick up sufficiently from the 4.2 per cent seen in the first half to give 4.5 per cent to five per cent for the entire year.   

She said the recovery in exports is anticipated to continue in 2014 and improve growth despite the fact that the nation have measures to rein in excesses.

Nevertheless, she said the Malaysian economy appears poised to expand by as much as above five per cent next year and described it as “extremely positive in this environment”.

Meanwhile, on possible US Federal Reserve’s tapering of the quantitative easing programme, she predicted that Malaysia would weather the impact from such move on the back of stronger financial system.

“Financial intermediaries are stronger, our financial markets more developed and we have stronger buffers in terms of our international reserves and we are less vulnerable in terms of our low external debt, and that renders us less vulnerable.

“Therefore, we believe we are in a position to intermediate the volatility, despite the fact that it might cause markets to adjust downwards.

“We believe that it’s temporary, that when the market adjusts to this, fundamentals will eventually prevail,” Zeti said.

She said although growth in major advanced economies remained modest, positive trends are emerging as conditions improved.

However, she said whether the improvement is self-sustaining remained to be seen because the growth could be vulnerable to setbacks.

“It is very important that these vulnerabilities are managed,” she said.

In other comments, Zeti urged that those rating Malaysian sovereign debt to take into account the trend of improvement on all fronts including the declining fiscal deficit and contained government indebtedness.

“Generally, rating agencies look at the numbers as is, and then express concern. They do not look at the trend and positive effects of the measures introduced,” she added. — Bernama