By TMR / Pic By AFP
Bank Negara Malaysia’s (BNM) Monetary Policy Committee (MPC) has maintained the Overnight Policy Rate (OPR) at 3.25%, while expecting the annual average headline inflation to remain low in 2018.
The MPC noted private sector activity remains vigorous, supported by consumption and conducive labour market conditions.
Investments are expected to sustain with spending on capacity expansion in key sectors and automation, while public sector spending weighs on growth amid continued reprioritisation of expenditure by the government.
Exports will provide an additional lift to the economy despite the moderation in global growth.
Headline inflation is expected to rise in 2019 on higher global oil prices and the floating of domestic fuel prices.
“While the impact of the consumption tax policy will contribute to higher headline inflation in 2019, it will lapse towards the end of 2019. Underlying inflation is expected to remain contained in the absence of strong demand pressures,” the policy statement yesterday noted.
Volatility in financial markets and monetary policy normalisation in advanced economies could lead to further capital outflows, the MPC said.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid expects the OPR to hold at 3.25% in 2019 as the country is stabilising its deficits.
“We expect such move will be retained next year as the country is not about to turn into the twin deficits, the fiscal and current account deficits, following the reprioritisation of mega infrastructure projects especially the rail-related projects, which typically command higher import content.”
The MPC is scheduled to convene next on Jan 23 and Jan 24, 2019.