KUALA LUMPUR, July 7 – The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) announced on Thursday that it will maintain the Overnight Policy Rate (OPR) at 3.00 percent. BNM clarified that the current OPR level reflects an accommodative monetary policy stance, which continues to support economic growth in the country. The central bank also stated that the MPC recognizes the limited risk of future financial imbalances.
BNM highlighted that it remains vigilant to ongoing developments and will continue to monitor new data to assess the prospects of inflation and economic growth in Malaysia. “The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth in a stable price environment,” explained BNM in its Monetary Policy Statement. According to BNM, the global economy is expanding due to resilient domestic demand conditions, supported by a robust labor market.
However, global growth is still hindered by persistent core inflation and higher interest rates. “While China’s reopening has contributed to global economic support, its recovery has slowed in recent months. Global headline inflation has continued to decline, but core inflation remains above the historical average. Most central banks are expected to maintain a tight monetary policy stance,” BNM added.BNM further noted that the outlook for continued growth is subject to risks, including slower economic momentum, higher-than-expected inflation, geopolitical tensions, and tightening financial market conditions.
Following strong growth in the first quarter of 2023, Malaysia’s economy has expanded at a more moderate pace in recent months, primarily due to slower external demand impacting exports, according to BNM. The central bank stated that future growth will continue to be driven by resilient domestic demand, with household spending supported by favorable labor market conditions, especially in sectors oriented towards domestic consumption.
BNM also expects tourist arrivals to increase steadily, which will boost tourism-related activities in the country. Regarding investments, BNM highlighted the ongoing implementation of multi-year infrastructure projects and favorable domestic financial conditions that facilitate financial intermediation and credit growth. The prospects for economic growth are contingent on the risk of global growth being weaker than expected, while domestic factors such as tourism activities and project implementation can contribute to higher growth, according to BNM.
BNM anticipates a decline in overall inflation due to lower cost factors. Core inflation has moderated but remains elevated compared to the long-term average, reflecting persistent demand and cost pressures. Overall, BNM projects that inflation, both overall and core, will be lower in the second half of 2023 but generally in line with expectations. The inflation outlook is subject to risks influenced by core inflation, domestic policy changes, global commodity prices, and financial market developments, added BNM.
