The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has decided to maintain the overnight policy rate (OPR) at 1.75%, despite Malaysia showing signs of economic recovery.
In a statement, BNM said it came to this decision after evaluating various factors, including the Russia-Ukraine conflict – which has emerged as a key risk to global economic growth, trade prospects, commodity prices, and financial markets. Additionally, there is the possibility of Malaysia still being affected by lingering concerns over Covid-19, risks of prolonged global supply disruptions, and heightened market volatility due to adjustments in monetary policies of major countries.
BNM further commented that risks to the country’s economic growth outlook remains tilted to the downside, whereas inflation in 2022 is projected to remain moderate. Core inflation, meanwhile, is expected to normalise to its approximated long-term average as economic activities continue to pick up amid the environment of high input costs.
That said, the central bank maintained that Malaysia’s economy can expect to continue its recovery trajectory moving forward, following an expansion of 3.1% in 2021 from the previous year. This is because the nation’s recovery will be supported by various elements, including an increase in global demand, higher private sector expenditure, improved labour market, as well as the expected reopening of international borders. Furthermore, the economic impact from the recent Covid-19 wave (Omicron variant) is expected to be less severe than previous waves.
In the face of all these elements, the MPC emphasised that it considers the current stance of monetary policy to be both appropriate and accommodative. “Fiscal and financial measures will continue to provide support to economic activity. Amid the prevailing uncertainties, the stance of monetary policy will continue to be determined by new data and their implications on the overall outlook for domestic inflation and growth,” BNM said.
The current OPR is the lowest on record, according to BNM data – brought down to 1.75% following four consecutive cuts back in 2020. The rate originally stood at 3.0%, but was subsequently pared down to 2.75% in January 2020, 2.50% in March 2020, 2.00% in May 2020, and finally 1.75% in July 2020.
(Source: Bank Negara Malaysia)
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