BNM To Maintain OPR At 1.75%

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

“For Malaysia, latest indicators point to continued improvements in economic activity in the first quarter and into April. While the recent re-imposition of containment measures in select locations will affect economic activity in the short term, the impact will be less severe as almost all economic sectors are allowed to operate,” BMM said.

The central bank further said that the growth trajectory is projected to improve, driven by the stronger recovery in global demand and increased public and private sector expenditure amid continued support from policy measures.

Growth will also 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.

“The progress of the domestic Covid-19 vaccine programme will also lift sentiments and contribute towards recovery in economic activity. The growth outlook, however, remains subject to downside risks, stemming mainly from ongoing uncertainties in developments related to the pandemic, and potential challenges that might affect the roll-out of vaccines both globally and domestically,” the bank said.

Additionally, headline inflation in 2021 is projected to average higher between 2.5 percent and 4.0 percent, primarily due to the cost-push factor of higher global oil prices.

In terms of trajectory, headline inflation is anticipated to temporarily spike in the second quarter of 2021, due particularly to the lower base from the low domestic retail fuel prices in the corresponding quarter of 2020.

However, this will be transitory as headline inflation is projected to moderate thereafter as this base effect dissipates. Underlying inflation, as measured by core inflation, is expected to remain subdued, averaging between 0.5 percent and 1.5 percent for the year, amid continued spare capacity in the economy. The outlook, however, is subject to global oil and commodity price developments.

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