9th September 2021 - 2 min read
The Monetary Policy Committee of Bank Negara Malaysia (BNM) has once more decided to keep the overnight policy rate (OPR) at 1.75%. This is the seventh meeting in which the key policy rate is held at its current rate since the last adjustment was made in July 2020.
According to a statement by BNM, the reimposition of nationwide restrictions several months back had dampened the growth momentum that was seen in the earlier quarters of 2021. However, the gradual relaxation of these measures in more recent times – which allowed for economic sectors to operate – as well as the higher adaptability of firms to the new operating environment and continued policy support will help to partially mitigate the impact.
Additionally, the central bank said that there are also several other factors that will support Malaysia’s growth momentum going into 2022. These include the further easing of containment measures, rapid progress of the domestic vaccination programme, and continued expansion in global demand.
That said, BNM also cautioned that risks remain tilted to the downside, attributing it to both domestic and external factors. One key factor highlighted is the delay in the easing or reimposition of broad-based containment measures due to the impact of new Covid-19 variants, as well as a weaker-than-expected global growth recovery.
As for headline inflation, it has averaged 2.3% year-to-date, and BNM projects it to average between 2% and 3% for 2021. The central bank also expects underlying inflation to remain subdued, averaging between 0.5% and 1.5% for the year. Of course, this outlook is subject to the global commodity price developments and policy measures to alleviate the cost burden off the public.
“The MPC considers the stance of monetary policy to be appropriate and accommodative. In addition, fiscal and financial measures will continue to cushion the economic impact on businesses and households, and provide support to economic activity. Given the uncertainties surrounding the pandemic, the stance of monetary policy will continue to be determined by new data and information, and their implications on the overall outlook for inflation and domestic growth,” said the central bank.
For context, BNM had slashed the OPR by a total of four times back in 2020, reducing it from 3.0% to 2.75% in January, then to 2.5% in March. In May 2020, BNM slashed the OPR by another 50 basis points, before lowering it further to its current record low of 1.75% in July 2020.
(Source: Bank Negara Malaysia)
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