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

By TMR / Pic TMR

THE Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has maintained the Overnight Policy Rate (OPR) at 1.75% amid rapid Covid-19 resurgence and looming political uncertainty. 

In a statement yesterday, the central bank stated 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, sizeable 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,” the central bank noted.

It added that 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, BNM added. The reimposition of nationwide containment measures to curb the resurgence in Covid-19 cases, however, will dampen 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 that 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,” the BNM statement noted.