Overnight Policy Rate Stays Put, BNM Remains Optimistic Of Future Growth

The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has decided to maintain the Overnight Policy Rate (OPR) at 1.75 percent.

“The MPC considers the stance of monetary policy to be appropriate and accommodative. Given the uncertainties surrounding the pandemic, the stance of monetary policy going forward will continue to be determined by new data and information, and their implications on the overall outlook for inflation and domestic growth,” the central bank said in a press statement.

The bank has also highlighted that the ongoing roll-out of vaccination programmes in many economies, together with policy support, will further facilitate an improvement in private demand and labour market conditions.

“While financial markets have experienced bouts of volatility, financial conditions remain supportive of economic activity.  Risks to the growth outlook have abated slightly, but remain tilted to the downside, primarily due to uncertainty over the path of the COVID-19 pandemic and effectiveness of the vaccination programmes,” BNM said.

BNM has also projected that growth is set to improve from Q2 onwards, driven by the recovery in global demand, increased public measures and more targeted containment measures.

Growth is also expected to be supported by higher production from existing and new manufacturing facilities, particularly in the E&E and primary-related sub-sectors as well as oil and gas facilities.

Wellian Wiranto, OCBC Bank Economist said he no longer expect BNM to cut rate anytime soon.

“The baseline scenario of some recovery coming through would indeed point towards the high possibility that the OPR would stay unchanged for the rest of the year,” he said.

“To us, the BNM’s thinking at this point appears to be: Growth is ticking up enough and hence there is less need for more easing, and the potential of global financial market volatility has gone up – even if only slightly – so why risk it?” he added.

HSBC ASEAN Chief Economist, Joseph Incalcaterra who is of a similar sentiment said HSBC is forecasting no further changes to the Overnight Policy Rate this year. “We agree with BNM’s broad assessment that after 1Q, Malaysia should see a robust recovery thanks to the credible vaccination plan coupled with a well-positioned export sector (replete with a large semiconductor industry, including significant production of automotive chips),” he said in a statement

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