BNM holds OPR steady at 1.75%, risk to economic growth remains

by TMR / pic by TMR FILE

MONETARY Policy Committee (MPC) of Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 1.75%.

In a statement today, the central bank said that although the global economic recovery has strengthened, supported by  improvements in manufacturing and services activity, the pace of recovery, however, varies across countries.

“Economies making better progress in their  vaccination programmes have been able to ease containment measures, enabling a swift recovery in domestic activity.

“In several advanced economies, sizable fiscal and monetary measures are also supporting a stronger  recovery momentum, although activities in some economies are disrupted by  tighter containment measures to curb COVID-19 resurgences,” said BNM.

It added the financial  conditions remain supportive of growth but the balance of risks to the growth outlook remains tilted to the downside, mainly due to uncertainty of the pandemic and potential risks of heightened financial market volatility.

“For the Malaysian economy, better-than-expected economic activity in the first quarter of 2021 continued into April, as reflected by latest indicators, particularly on exports, retail spending and labour market conditions,” the central bank stated.

The reimposition of nation-wide containment measures to curb the resurgence in COVID-19 cases, however, will dampen the growth momentum.

“The degree  of impact to the economy is highly dependent on the stringency and duration  of containment measures.

“Nevertheless, continued allowances for essential  economic sectors to operate, albeit at a reduced capacity, and higher  adaptability to remote work, automation and digitalisation will partly mitigate the impact of restrictions,” said BNM.

It added the various policy support packages will alleviate some of the financial burdens of households and businesses and favourable external demand conditions will continue to provide a lift to growth.

“Going forward, the gradual relaxation of containment measures, alongside the rapid progress of the domestic vaccination programme and continued strength in external demand will provide support for the growth recovery into 2022,” it added.

The MPC said it considers the stance of monetary policy to be appropriate and  accommodative.

“In addition, fiscal and financial measures will continue to cushion the economic impact on businesses and households and provide support to economic activity,” said BNM.