KUALA LUMPUR – Malaysia maintained its overnight policy rate (OPR) at 3 per cent, a move widely expected by economists, as economic growth and inflation continue to ease.
Bank Negara Malaysia announced this on Thursday (Sep 7) after the Monetary Policy Committee’s (MPC) meeting, noting that the current OPR “remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects”.
This is the third time the MPC has decided to keep the OPR at 3 per cent, after hiking the rate by 25 basis points in May this year. The decision was also in line with all 27 economists’ projections in a recent Reuters poll.
With the central bank changing its tone on its monetary stance, economists maintained their views that the country’s OPR will remain at 3 per cent the rest of the year.
Ms Lavanya Venkateswaran, senior Asean economist at OCBC, said: “As Bank Negara no longer sees its stance as ‘slightly accommodative’, as it has highlighted in July, we remain comfortable with our forecast for Bank Negara to stay on hold for the rest of this year.”
MIDF Research said the current focus of Bank Negara’s monetary policy-setting is to ensure a sustainable growth momentum for the country’s economy.
“Even though core inflation is still sticky, weakening external trade performances” are seen as dragging overall gross domestic product (GDP) growth, MIDF said in a note on Thursday. “We expect Bank Negara to keep the OPR status quo in the last MPC meeting in November,” it added.
Malaysia’s headline and core inflation have continued to ease amid the more moderate cost conditions, with July’s inflation growth at 2 per cent – the lowest rate in nearly two years.
Bank Negara expects the moderating trend to continue in the coming months, partly reflecting the higher base from the same period last year.
The central bank also noted that the global economy continues expanding, driven by resilient domestic demand supported by strong labour market conditions; however, growth was weighed down by persistently elevated core inflation and high interest rates.
The rotation of spending from goods to services, the ongoing tech downcycle, as well as slower-than-expected growth in China have affected global trade.
In the second quarter of 2023, the Malaysian economy’s growth was affected by slower external demand and a decline in commodity production. The country’s GDP eased to 2.9 per cent, compared to a growth of 5.6 per cent in the first quarter.
Nevertheless, Malaysia’s economy will continue growing in the challenging external environment, anchored by resilient domestic expenditure – supported by improving employment and wage growth, as well as robust tourism activities, said Bank Negara.
“Investment activity would be supported by (the) continued progress of multiyear infrastructure projects, and (the) implementation of catalytic initiatives under the recently-announced national master plans,” it added.
Domestic financial conditions also remain conducive to financial intermediation amid sustained credit growth. These factors will continue to underpin the growth momentum into 2024.
Source : TheStraitsTimes