At the Monetary Policy Meeting today, Bank Negara decided to keep the Overnight Policy Rate (OPR) unchanged at 1.75%, in line with our and market’s expectations.
The current rate is deemed to be appropriate and supportive of Malaysia’s economic growth.
For Malaysia, economic activity weakened in the third quarter, amid the imposition of nationwide containment measures to curb the resurgence in COVID-19 cases.
However, in line with the relaxation of restrictions, the latest high-frequency indicators show that economic activity has recovered from the trough in July, says BNM.
“Going into 2022, the growth momentum is expected to improve, supported by expansion in global demand, higher private sector expenditure in line with the resumption of economic activity and continued policy support.
“Risks to the growth outlook, however, remain tilted to the downside due to external and domestic factors. These include a weaker-than-expected global growth, a worsening in supply chain disruptions, and the re-imposition of containment measures due to the impact of new COVID-19 variants of concern.”
On the price developments, unlike other central banks, BNM views inflation to be manageable as the latest inflation reading falls within the BNM’s 2.0-3.0% inflation forecast range.
BNM also shared its view that inflation will moderate going into 2022, with core inflation to increase but remain benign due to ongoing excess capacity in the economy as well as slack in Malaysia’s job market.No change this year; but expect normalisation to begin next year.
“Despite keeping the OPR unchanged at 1.75% throughout this year, we foresee BNM will consider normalizing its benchmark interest rate next year. At this point, we expect the policy normalisation will likely be carried out in the latter half of 2022. However, the decision will be subject to the stability of economic growth, the pace of price increases and a further improvement in macroeconomic conditions,” says MIDF Research.
