Zeti Akhtar Aziz, Malaysia’s central bank governor, comments on interest rates, inflation, economic growth and consumer debt. She made these remarks in a Bloomberg Television interview in Istanbul.
On whether there’s a need for monetary policy tightening in Malaysia:
“Interest rate policy should be based on the outlook for inflation and growth. We need to assess this this very carefully in deciding the future direction. There should not be an overreaction and over-adjustment because this would result in an over-adjustment in the economy.
“Right now, we have a moderation in the rate of inflation. We have interest rates at a point where they are accommodative. Accommodative in the sense it is not restricting borrowing activities and it is supporting the overall growth. Therefore, at this point in time, I believe that unless inflation does begin to again rise, it does not merit consideration of raising rates.”
On whether there’s a need to revise the central bank’s 2012 gross domestic product growth forecast of between 4 percent and 5 percent:
“At this point in time, not. Because that 4 to 5 percent is mainly driven by domestic demand. Domestic demand includes consumption demand and investment by the private sector. This is currently highly robust. We already priced in the prospect of significantly lower export growth.”
On whether Malaysia is on course to achieve the central bank’s 2012 inflation estimate of between 2 percent and 3 percent:
“That is intact. We are seeing a moderation. The only risk to that range of inflation is commodity prices. If energy prices would rise sharply like it did in 2008, then we could see higher prices. But in the event that does not happen, we see inflation will continue to moderate.”
On risk concerns over rising property prices and household debt:
“At this point, we have already put in place, we believe pre-emptively, wide-ranging measures to address this issue. That is one of the reasons, aside from inflation, that we saw that interest rates had to be normalized. We raised interest rates. This was to ensure there was no mispricing of risk.
“Secondly, we introduced several macro-prudential measures and then responsible lending guidelines. The government also revised property gains tax. Not all of them (banks) were involved in excessive lending activities. Though those that were, we have the oversight provided by our supervisory actions. This has already reined those kinds of excessive lending.”
On whether there is a need for the central bank, to ask lenders to set aside more reserves against property lending:
“At this point not. They have already huge buffers already built up. We undertake stress tests. These have indicated the banks being well-capitalized and the high quality of their portfolio continues to improve and they are well-positioned to withstand any set-back in terms of growth or volatility.”
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