Bank Negara maintains OPR at 3%
Published on: Thursday, March 07, 2024
By: FMT
The central bank has maintained the OPR at 3% at every Monetary Policy Committee meeting since July last year.
PETALING JAYA: Bank Negara Malaysia (BNM) has maintained the overnight policy rate (OPR) at 3%.
Yesterday, Standard Chartered Global Research said the central bank was likely to maintain the OPR amid moderating growth and inflation.
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The central bank has maintained the OPR at 3% at every Monetary Policy Committee (MPC) meeting since July last year.
BNM last raised the OPR, from 2.75% to 3%, in May last year, citing the need to “normalise monetary accommodation” in the face of a resilient economy as well as the need to manage persistent inflation.
“At the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects.
“The MPC remains vigilant to ongoing developments to inform the assessment of the outlook of domestic inflation and growth,” the central bank said in a statement.
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BNM said the MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability.
It said the global economy continues to expand albeit moderately, supported by domestic demand amid improvement in trade activity.
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“Favourable labour market conditions in some countries continue to support consumption activity.
“Looking ahead, growth in regional economies is expected to improve, while China’s growth would likely remain modest given continued weakness in the property market,” it noted.
Global trade is expected to strengthen as the global tech upcycle gains momentum. Global headline and core inflation edged downwards in recent months with prospects of monetary easing in some countries in the second half of the year.
“Nonetheless, the global monetary policy stance is likely to remain tight in the near term, as inflation remains above average.
“The growth outlook remains subject to downside risks, mainly from an escalation of geopolitical tensions, higher-than-anticipated inflation out-turns, and volatility in global financial markets,” it said.
BNM said the Malaysian economy expanded by 3.7% in 2023. Moving forward, growth is expected to improve in 2024, driven by the recovery in exports and resilient domestic expenditure.
“Export growth is turning positive after contracting since March 2023 and will continue to be supported by stronger global trade,” it said.
Furthermore, it said tourist arrivals and spending are poised to rise further.
“Continued employment and wage growth remain supportive of household spending.
“Investment activity would be supported by the ongoing progress of multi-year projects in both the private and public sectors, the implementation of catalytic initiatives under the national master plans, as well as the higher realisation of investments,” it added.
However, the growth outlook is subject to downside risks stemming from weaker-than-expected external demand and larger declines in commodity production.
“Meanwhile, upside risks to growth mainly emanate from greater spillover from the tech upcycle, more robust tourism activity and faster implementation of existing and new projects,” it said.
In addition, it said headline and core inflation stood at 1.5% and 1.8% respectively in January 2024, trending in line with expectations.
Inflation in 2024 is expected to remain moderate, broadly reflecting stable demand conditions and contained cost pressures.
However, BNM said this outlook continues to be highly dependent on the implementation of domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments.
“As for the ringgit, the local currency is currently undervalued, given Malaysia’s economic fundamentals and growth prospects,” it said.
The government and BNM are taking coordinated actions to encourage the repatriation and conversion of foreign investment income by GLCs and government-linked investment companies.
“These actions are contributing to greater inflows, lending support to a firmer ringgit.
“Over the medium term, ongoing structural reforms will provide more enduring support to the ringgit,” BNM said.
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