by TMR / pic by MUHD AMIN NAHARUL
BANK NEGARA holds the Overnight Policy Rate steady at 1.75% in the second Monetary Policy Committee (MPC) as the market expected.
The rate which is the lowest on record has been kept at 1.75% since July 7, 2020.
In a statement today the central bank said risks to the growth outlook remain tilted to the downside due to external and domestic factors.
These include weaker-than-expected global growth, ongoing geopolitical conflicts, worsening supply chain disruptions, and developments surrounding COVID-19.
“Headline inflation in 2022 is projected to remain moderate as the base effect from fuel inflation continues to dissipate.
“Underlying inflation, as measured by core inflation, is expected to normalise to around its long-term average as economic activity continues to pick up amid the environment of high input costs,” BNM said.
Nevertheless, core inflation is expected to be modest, with the upside risk partly contained by the continued slack in the economy and labour market.
The inflation outlook continues to be subject to global commodity price developments amid risks from prolonged supply-related disruptions.
“Despite the challenging environment, the Malaysian economy expanded by 3.1% in 2021. Looking ahead, the growth recovery will strengthen in 2022, driven by the expansion in global demand and higher private sector expenditure, amid improvements in the labour market and continued targeted policy support.
The expected reopening of international borders would also provide further support to economic recovery. The economic impact from the recent increase in COVID-19 cases due to the Omicron variant is expected to be considerably less severe than previous waves in the absence of stringent restrictions,” the central bank stated.
It added fiscal and financial measures will continue to provide support to economic activity.
“Amid the prevailing uncertainties, the stance of monetary policy will continue to be determined by new data and their implications on the overall outlook for domestic inflation and growth,” said BNM.