Bank Negara Malaysia keeps OPR at 3% to support economic growth
Published on: Thursday, September 05, 2024
By: FMT Business
All 30 economists in a Reuters poll predicted that BNM would leave the OPR unchanged at 3%.
PETALING JAYA: Bank Negara Malaysia has maintained the overnight policy rate at 3% to support the country’s economic growth.
The central bank’s decision to hold the benchmark interest rate steady at the conclusion of its two-day Monetary Policy Committee meeting today was widely anticipated.
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In a statement, BNM said at the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of inflation and growth prospects.
The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability, it said.
On the Malaysian economy, BNM said the latest indicators point towards sustained strength in economic activity in the second quarter of 2024, driven by resilient domestic expenditure and better export performance.
“Going forward, exports are expected to be further lifted by the global tech upcycle given Malaysia’s position in the semiconductor supply chain, as well as continued strength in non-electrical and electronics goods.
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Tourist arrivals and spending are also poised to rise further. Continued employment and wage growth, as well as policy measures, will continue to support household spending, it said.
BNM said the growth outlook is subject to downside risks from weaker-than-expected external demand and larger declines in commodity production.
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The central bank said both headline and core inflation averaged 1.8% in the first five months of the year.
As expected, inflation will trend higher in the second half of 2024, amid the recent rationalisation of diesel subsidies.
For the year, headline and core inflation are expected to average within the earlier projected ranges of 2%-3.5% and 2%-3% respectively.
BNM said the ringgit continues to be primarily driven by external factors, namely expectations of major economies’ monetary policy paths and ongoing geopolitical tensions.
It noted the positive impact of the initiatives by the government and BNM with GLCs and government-linked investment companies, and corporate engagements have continued to cushion the pressure on the ringgit.
Over the medium term, domestic structural reforms will provide more enduring support to the ringgit, it added.
BNM last raised the OPR from 2.75% to 3% in May 2023, and has held the rate steady at every MPC meeting since. It had slashed the OPR to its lowest ever at 1.75% in July 2020 during the Covid-19 pandemic.
As the outbreak subsided, BNM reversed course and hiked the rate by a cumulative 125 basis points between May 2022 and May 2023. At the current rate, the OPR is still lower than it was in early 2019 when it was at 3.25%.
BNM’s decision came as no surprise to economists and market observers. All 30 economists in a Reuters poll conducted between Aug 27 and Sept 2 predicted that BNM would leave the rate unchanged. A similar Bloomberg News survey saw all 21 economists predicting BNM would keep the OPR steady.
Malaysia’s monetary policy meeting comes two weeks before the US Federal Reserve is widely expected to start its rate-cut cycle.
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