Malaysia's central bank maintained the interest rate on Thursday, saying the strong domestic demand has hedged the slowdown of developed economies and the volatility of the global financial markets.
Bank Negara, the central bank, said in a statement that its monetary policy committee had decided to maintain the Overnight Policy Rate at 3 percent, given "the current stance of monetary policy to be accommodative and supportive of the economy."
The bank pointed out that the global growth momentum has moderated, affecting the rest of the world, including emerging economies in Asia.
"While the Malaysian economy is affected by these global developments, domestic demand has continued to support economic growth," Bank Negara said.
Such trend is expected to continue, the bank said.
"Private consumption is supported by income growth and stable employment conditions. Investment activity is mainly driven by capital spending in the domestic-oriented industries, the oil and gas sector and the on-going implementation of infrastructure projects."
Malaysia's economic growth accelerated to 5.4 percent in the second quarter, mainly driven by strong domestic consumption, while the headline inflation moderated to 1.7 percent.
Bank Negara said inflation is expected to remain moderate for the remainder of 2012 and into 2013, adding that given some excess capacity in the economy, domestic demand is not expected to result in inflationary conditions.