BNM maintains OPR at 1.75%

by BERNAMA / pic by TMR FILE

THE Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has decided to maintain the Overnight Policy Rate (OPR) at 1.75 per cent, the lowest level since it was implemented in 2004.

In a statement, it said the global economy continues to improve, with the easing of containment measures across more economies and strong policy support.

“The re-opening of production facilities has led to a resumption of manufacturing and trade activity, however, the recovery in the services sector has been slower. Financial conditions have improved, although risk aversion remains elevated.

“The outlook is still subject to downside risks and uncertainty, primarily due to the risk of a resurgence of the pandemic and weaker labour market conditions,” it said.

For Malaysia, the central bank said economic activity continues to recover from the trough in April this year, and the latest high frequency indicators show that labour market conditions, household spending and trade activity have continued to improve.

“The economic recovery is also supported by the fiscal stimulus packages, alongside monetary and financial measures.

“Looking ahead, the improvement is expected to continue into 2021, supported by the recovery in external demand and expansion in private sector expenditure,” it said.

However, BNM said the pace of recovery will be uneven across sectors, with economic activity in some industries remaining below pre-pandemic levels and the slower improvement in the labour market.

“This outlook is still subject to downside risks, particularly from ongoing uncertainties surrounding the course of the pandemic domestically and globally,” it added.

Meanwhile, BNM said inflationary pressures are expected to remain muted in 2020, with headline inflation likely to average negative in 2020 given the substantially lower global oil prices, and average higher in 2021 within the earlier projected ranges.

“The outlook, however, will continue to be significantly affected by global oil and commodity prices.

“Underlying inflation is expected to be subdued amid spare capacity in the economy,” it said.

The central bank said the cumulative 125 basis points reduction in the OPR this year will continue to provide stimulus to the economy.

“Given the outlook for growth and inflation, the MPC considers the stance on the monetary policy to be appropriate and accommodative.

“The bank remains committed to utilise its policy levers appropriately to create enabling conditions for a sustainable economic recovery,” it said.

Today marked the MPC’s fifth meeting this year, and the committee is expected to hold its last meeting for the year on Nov 3.