KUALA LUMPUR, Oct 29 — Bank Negara Malaysia (BNM) has said its close consultation and agreement with the United States (US) Treasury reflect existing practices and “do not in any way affect the ability to independently formulate monetary policy, or our ability to safeguard the stability and value of the ringgit.”
The national central bank noted that other major US trading partners, including Thailand, Japan, South Korea, and Switzerland, have made similar commitments.
It has been an existing practice for BNM to share foreign exchange intervention data bilaterally with the US Treasury on a semi-annual basis, with the US Treasury given consent to quote the data in its Foreign Exchange (FX) Reports published in June and November each year.
“Bilateral cooperation has been instrumental in ensuring Malaysia is not being grouped with countries perceived as having non-transparent FX policies,” BNM said in response to Bernama’s query.
It added that such disclosure does not contain any sensitive data and does not impede its ability to undertake foreign exchange interventions to manage excessive volatility and preserve ringgit stability.
The bank's ability to conduct FX intervention as a policy tool to stem excessive exchange rate volatility is consistent with these commitments.
“This is expressly acknowledged in the agreement with the US Treasury. BNM’s monetary policy is formulated and implemented independently in accordance with the mandate provided under the Central Bank of Malaysia Act 2009,” BNM said.
The objective of monetary policy is to maintain price stability that is conducive to economic growth. The overnight policy rate (OPR) is the primary monetary policy tool.
“The ringgit exchange rate is not a monetary policy objective. BNM also has a long-standing stance against using the ringgit to boost trade competitiveness. The Monetary Policy Committee (MPC) considers exchange rate developments only to the extent that they influence the outlook for domestic inflation and growth,” it said.
Yesterday, BNM and the US Treasury agreed to continue close consultations on macroeconomic and FX matters, reaffirming their commitment under the International Monetary Fund (IMF) Articles of Agreement to avoid manipulating exchange rates or the international monetary system for unfair competitive advantage or to prevent effective balance of payments adjustment.
