BNM kept its policy rate unchanged at 3.00%, in line with consensus and expectations. The tone of the official policy statement remained largely neutral.
OCBC Senior ASEAN Economist Lavanya Venkateswaran (pic) said despite the growth slowdown in 2Q23, Bank Negara Malaysia (BNM) expects that growth momentum will continue to be supported by domestic economic activities, namely government spending as well as new initiatives under the recently announced master plans.
BNM did, however, add another downside risk to growth compared to the July statement, i.e., “larger and protracted declines in commodity production” underscoring concerns around the ongoing El Nino phenomenon.
“On inflation, its outlook is broadly unchanged compared to its July meeting. It noted that easing inflation should continue into 2H23 given the higher base effect from 2H22. It maintained, similar to its July statement, that “risks to the inflation outlook remain highly subject to changes to domestic policy on subsidies and price controls, global commodity prices and financial market developments, as well as the degree of persistence in core inflation,” she said in a statement by OCBC Global Markets Research today (Sept 7).
BNM no longer sees its stance as “slightly accommodative” as highlighted in July. Instead, BNM stated that “at the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects.”
As such, OCBC remains comfortable with their forecast for BNM to stay on hold for the rest of this year.
