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Bank Negara Malaysia's Monetary Policy In Malaysia

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1.0 Introduction
Bank Negara Malaysia (BNM, also called the national bank of Malaysia, it is Malaysia’s central bank officially) is a Malaysian central bank. Was established in 26th January 1959 as the Bank Negara of Malaya, its main purpose is to act as bankers and advisers to Malaysia’s government and regulates the nation 's financial institutions, issues currency, credit system and monetary policy. Its headquartered is located in Kuala Lumpur, which is the Malaysia 's federal capital. The bank actively developing financial inclusion policy and financial inclusion is an important member of the Alliance. AFI Global Policy Forum (GPF) jointly sponsored agencies in Kuala Lumpur, Malaysia in 2013.
Bank Negara Malaysia’s monetary policy …show more content…

3.1 Monetary Policy Objectives
The monetary policy ‘s objective is to maintain price stability, while considering the economic development. Section 23, 25 and 26, of the Central Bank of Malaysia Act 2009 stipulate that monetary policy committee is responsible for monetary policy as well as the policies to the behavior of the monetary policy operation, and the BNM should implement the decision of the monetary policy committee.
3.2 Monetary Policy in 2011
The Overnight Policy Rate (OPR) was raised by 25 basis points to 3.00%, in May 2011, in order to further normalize monetary conditions and increase the OPR, as growth is expected to remain in a stable growth path, and the upside risks to inflation is given. Monetary conditions are also normalized to prevent the build-up of financial imbalances. When the headline inflation rate is given the higher food and fuel prices, around the uncertainty of global economic growth and financial market conditions lead to larger downside risks to domestic growth. The OPR is unchanged in the rest of year. The Statutory Reserve Requirement (SRR) was increased 300 basis points from 1% to 4% between March and July 2011, as pre-emptive measures to manage foreign capital inflows by the significant accumulation of liquidity. The increase of liquidity in the domestic financial system must be managed carefully, in order to reduce the risk of macroeconomic and …show more content…

Monetary stability refers to the stability of the value of Malaysian currency, the Ringgit. The best way to ensure the value of preserved, is ensuring price stability, which is to make sure to keep low and stable inflation in the country. Through the appropriate change of monetary policy to maintain currency stability, Bank Negara Malaysia will ensure that inflation is keep at a lower level, and the purchasing power of the ringgit is not diminished.
Why is monetary stability so important?
This is important because when a currency is not stable, prices are rising (inflation) or falling (deflation), and this may lead to distortion and undermine of the country 's long-term economic growth prospects.
If inflation is too high, people will worry about their purchasing power of money balances. This will result to a bigger demand and needs for the real assets such as houses and properties, which is considered to be "inflation-proof". There would be less investment in production capacity of the

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