KUALA LUMPUR (Sept 7): Bank Negara Malaysia (BNM) has decided to keep the overnight policy rate (OPR) at 3%, amid robust domestic demand supported by strong labour market conditions.
This is as the central bank pointed to slower external demand and a decline in commodity production, which affected Malaysia’s economic growth in the second quarter of this year.
This is the third consecutive time that the OPR has been at 3%. In May, the central bank raised the OPR by 25 basis points from 2.75% to 3%.
BNM said that at the current OPR level of 3%, the monetary policy stance continues to support the economy, and is consistent with the current assessment of inflation and growth prospects.
“The MPC (Monetary Policy Committee) remains vigilant to ongoing developments to inform the assessment of the outlook for domestic inflation and growth. The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability,” said the central bank in a statement on Thursday.
Continued employment and wage growth, especially in domestic market-oriented sectors, improved tourist arrivals and spending, investment activity supported by further progress on multi-year infrastructure projects, and the implementation of catalytic initiatives under the recently announced national master plans are factors that will support the economy’s growth momentum next year, BNM said.
“While the growth outlook is subject to downside risks stemming from weaker-than-expected external demand and larger and protracted declines in commodity production, upside risks mainly emanate from stronger-than-expected tourism activity, a stronger recovery from the E&E (electrical and electronics) downcycle, and faster implementation of existing and new projects,” said the central bank.
Moderating inflation trend seen continuing
Touching on inflation, BNM said headline and core inflation continued to ease amid the more moderate cost conditions, which were in line with expectations.
The trend is likely to continue in the second half of the year (2H2023), amid continued easing momentum of price increases and reflective of a high base in 2H2022, the central bank said.
“Risks to the inflation outlook remain highly subject to changes to domestic policy on subsidies and price controls, global commodity prices and financial market developments, as well as the degree of persistence of core inflation,” it added.
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Source: EdgeProp.my
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