Bank Negara Malaysia has maintained the overnight policy rate (OPR) at 2.75% following its Monetary Policy Committee (MPC) meeting today (March 9).
The central bank said at the current OPR level, the stance of monetary policy remains “accommodative and supportive of economic growth”.
“The MPC will continue to assess the impact of the cumulative OPR adjustments, given the lag effects of monetary policy on the economy. The MPC remains vigilant to cost factors, including those arising from financial market developments, that could affect the inflation outlook,” it said in a statement today.
“Further normalisation to the degree of monetary policy accommodation would be informed by the evolving conditions and their implications to the domestic inflation and growth outlook,” it said.
The MPC will continue to calibrate the monetary policy settings that balance the risks to domestic inflation and sustainable growth.
The balance of risk to the inflation outlook is tilted to the upside and continues to be highly subject to any changes to domestic policy on subsidies and price controls, as well as global commodity price developments.
The central bank said headline inflation moderated slightly from high levels in recent months, but core inflation remained above historical averages.
“The growth outlook remains subject to downside risks, mainly from an escalation of geopolitical tensions, higher-than-anticipated inflation outturns, and a sharp tightening in financial market conditions,” it said.
It added some central banks are expected to continue raising interest rates to manage inflationary pressures. This will continue to pose headwinds to the global growth outlook, it added.
In the global economy, there were some positive developments with the reopening of China’s economy and better-than-expected growth outturns in major economies, supported by resilient domestic demand.
“Nevertheless, the global economy continues to be weighed down by elevated cost pressures and higher interest rates.”
Economic expansion
The Malaysian economy expanded strongly by 8.7% in 2022 driven by the recovery in private and public sector spending following the full reopening of the economy.
“After the strong performance in 2022, the economy is expected to moderate in 2023 amid a slower global economy. Growth will remain driven by domestic demand.
“Household spending will be underpinned by sustained improvements in employment and income prospects.
Tourist arrivals are expected to continue rising, further lifting tourism-related activities. The continued progress of multi-year infrastructure projects will support investment activity, it said.
“The implementation of projects from the recently retabled Budget 2023 would provide upside risks to the domestic growth outlook.”
At its last MPC meeting in January, BNM surprised by hitting the pause button to maintain the OPR at 2.75%, after four consecutive 25-basis point hikes in 2022.
BNM said then the decision not to raise the OPR for the fifth time was to allow it to assess the impact of the past cumulative OPR adjustments, given the lagging effects of monetary policy on the economy.
Eleven of the 20 economists surveyed by Bloomberg had expected BNM to maintain the OPR, while the remaining saw it to be lifted by 25 basis points to 3%.
