Bank Negara stays put on OPR at 3%

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KUALA LUMPUR: Bank Negara kept the overnight policy rate (OPR) unchanged at 3% upon the conclusion of its two-day monetary policy committee (MPC) meeting, which was in line with the median expectations of economists.

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A Reuters poll saw 22 out of 25 economists predicting the central bank would maintain the status quo while only three of those surveyed said it would raise the interest rate by 25 basis points.

Including its last rate hike in May 2023, Bank Negara had increased the OPR by 125 basis points from an all-time low of 1.75% in March 2022.

“At the current OPR level, the monetary policy stance is slightly accommodative and remains supportive of the economy.

“The MPC continues to see limited risks of future financial imbalances,” said Bank Negara in a statement.

On the domestic economy, the central bank said it expanded at a mode moderate pace in recent months following a strong outturn in the first quarter of 2023.

Moving forward, it said growth for the remainder of the year will continue to be driven by resilient demestic demand with household spending underpinned by favourable labour market conditions, particularly in domestic-oriented sectors.

Bank Negara said tourist arrivals are expected to continue rising while investment activity would be supported by continued progress of multi-year infrastructure projects.

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Domestic financial conditions also remain conducive to financial intermediation amid sustained credit growth, it said.

“While the growth outlook is subject to some downside risks stemming from weaker-than-expected global growth, upside risks mainly emanate from domestic factors such as stronger-than-expected tourism activity and faster implementation of projects,” it added.

According to Bank Negara, Malaysia’s headline inflation has continued to ease amid lower cost factor.

It said core inflation has also moderated although it remains elevated relative to the long-term average amid lingering demand and cost factors.

“For the second half of 2023, both headline and core inflation are projected to trend lower, broadly within expectations.

“Risks to the inflation outlook remain highly subject to the degree of persistence in core inflation, changes to domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments,” said the central bank.

– The Star


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