BNM keeps OPR at 3% as it bets on steady growth, with manageable inflation

Mar 6, 2025

The central bank anticipates global growth to be sustained by positive labour market conditions, moderating inflation, and less restrictive monetary policies, with global trade to remain supported by the ongoing tech upcycle, although it flagged risks from uncertainties surrounding tariffs, major economies’ policies, and geopolitical developments.
KUALA LUMPUR (March 6): Bank Negara Malaysia (BNM) maintained the overnight policy rate (OPR) at 3% on Thursday, as widely expected, citing an outlook of continued global and domestic growth, despite tariff and geopolitical uncertainties from major economies, and manageable inflation.

The decision was reached by its Monetary Policy Committee (MPC) in a meeting on Thursday. Before the announcement, a Bloomberg poll of 23 economists predicted the central bank would maintain the benchmark interest rate to preserve policy flexibility amid potential impact from new US tariffs. BNM’s last rate adjustment was a 25-basis-point increase in May 2023.

“At the current OPR level, the monetary policy stance remains supportive of the economy, and is consistent with the current assessment of inflation and growth prospects,” BNM said in a statement on Thursday, after noting that the latest indicators pointed towards continued global growth, supported by resilient domestic demand and global trade.

The central bank anticipates global growth to be sustained by positive labour market conditions, moderating inflation, and less restrictive monetary policies, with global trade to remain supported by the ongoing tech upcycle, although it flagged risks from uncertainties surrounding tariffs, major economies’ policies, and geopolitical developments. “Disinflation in most advanced economies is expected to continue, facilitated by moderating commodity prices, and the dissipating effects of past monetary policy tightening,” it said.

As for the domestic economy, the central bank anticipates economic activities to remain strong in 2025, with employment, wage growth, and increases in the minimum wage and civil servant salaries supporting household spending. Malaysia’s economy grew by 5.1% in 2024, driven by stronger domestic demand and a rebound in exports.

Growth will also be aided by robust expansion in investment activity. This expansion will be sustained by the progress of multi-year projects in both the private and public sectors, the continued high realisation of approved investments, and the ongoing implementation of catalytic initiatives under the national master plans, it said.

Export growth, however, is expected to moderate due to ongoing global policy uncertainties, it said, though exports will remain supported by the global tech upcycle, continued growth in non-electrical and electronics industries, and increased tourist spending.

Partner slowdowns and trade policy uncertainties could weigh on exports, though this could potentially be offset by stronger tech spillovers, robust tourism, and faster investment project implementation, it said.

The government has forecast that export growth would slow to 3.9% this year, from 5.7% in 2024, following an 8% contraction in 2023.

Easing global cost conditions
BNM expects inflation to remain manageable, amid easing global cost conditions and stable domestic demand.

This follows the steady headline and core inflation of 1.7% and 1.8% in January this year, compared with 1.7% and 1.6% respectively in December 2024. For 2024 as a whole, both headline and core inflation declined to 1.8%, compared with 2.5% and 3.0% respectively, in 2023.

“Global commodity prices are expected to continue to trend lower, contributing to moderate cost conditions,” it said, adding that the recently introduced wage-related policies are expected to have a limited impact on inflation.

Upside risks to inflation would depend on the extent of spillover effects from domestic policy measures, as well as external developments surrounding global commodity prices, financial markets, and trade policies, BNM said.

Domestic prospects and structural reforms to support ringgit
The ringgit’s performance remains influenced by external developments, BNM noted, with narrowing interest rate differentials between Malaysia and advanced economies providing support.

While financial markets may experience heightened volatility due to global policy uncertainties, favourable domestic economic prospects and structural reforms, complemented by ongoing initiatives to encourage flows, will continue to provide enduring support to the ringgit, BNM added.

“The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability,” it added.

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Source: EdgeProp.my