In March Bank Negara Malaysia (BNM, the central bank) announced its intention to raise the statutory reserve requirement (SRR) ratio from 1% to 2%, with effect from April 1st. The SRR ratio is the share of assets commercial banks are obliged to hold with the central bank. BNM explained that its decision was a pre-emptive measure aimed at mitigating risks to macroeconomic and financial stability. The central bank said that Malaysia had, like other Asian economies, experienced a build-up of liquidity from large capital inflows in the past year or so. BNM was careful to point out that the increase in the SRR ratio was done to specifically manage liquidity and that it should not be interpreted as a further tightening of monetary policy. The central bank has been keen to stress that only changes in the overnight policy rate (OPR) should be taken as an indication of its monetary policy stance.

The latest move can be interpreted as part of the central bank's wider process of normalising monetary policy. The SRR ratio fell to a record low of 1% in February 2009 in the wake of the 2008-09 global financial crisis. In 2008 the ratio fluctuated between 3% and 4%. The latest measure had been anticipated after it was flagged in the January 27th monetary policy statement. Separately, at its policy meeting in March BNM decided to keep the OPR unchanged, at 2.75%, suggesting that the current monetary policy stance would remain supportive of economic growth.