BNM maintains OPR at 3% amid economic outlook

BANK Negara Malaysia (BNM) has decided to keep the overnight policy rate (OPR) unchanged at 3% during its first Monetary Policy Committee (MPC) meeting of the year.

The central bank has now held the OPR steady for 10 consecutive meetings since May 2023.

This decision reflects the bank’s ongoing assessment of inflation and growth prospects.

In a statement today, BNM explained that the “monetary policy stance remains supportive of the economy and is consistent with the current assessment of inflation and growth prospects.”

The bank also emphasized its vigilance, noting that “the MPC remains vigilant to ongoing developments to inform the assessment on the domestic inflation and growth outlook.”

Regarding Malaysia’s economic performance, BNM expects sustained economic activity into 2025, driven by “resilient domestic expenditure.”

The bank highlighted factors such as “employment and wage growth, as well as policy measures, including the upward revision of the minimum wage and civil servant salaries,” which would support household spending.

Furthermore, BNM anticipates that “the robust expansion in investment activity will be sustained by the progress of multi-year projects in both the private and public sectors.”

While global growth in 2024 surpassed expectations, BNM did note potential risks to growth. These include “an economic slowdown in major trading partners amid heightened risk of trade and investment restrictions, and lower-than-expected commodity production.”

However, the bank also identified factors that could boost growth, including “greater spillover from the tech upcycle, more robust tourism activity, and faster implementation of investment projects.”

On inflation, the bank expects it to remain manageable, with headline and core inflation averaging 1.8% in 2024.

It cited easing global cost conditions and the “absence of excessive domestic demand pressures.”

BNM added that “global commodity prices are expected to continue to trend lower, contributing to moderate cost conditions in the near term.”

In terms of the ringgit, BNM noted that the local currency’s performance is primarily influenced by external factors, with the narrowing interest rate differentials between Malaysia and advanced economies seen as “positive for the ringgit.”

It also highlighted that Malaysia’s favorable economic prospects and “domestic structural reforms” will provide support to the currency despite potential market volatility. — TMR