7th September 2023 - 3 min read
Bank Negara Malaysia (BNM) has decided to keep the overnight policy rate (OPR) unchanged at 3.00% at its Monetary Policy Committee (MPC) meeting today. Accordingly, the ceiling and floor rates of the corridor of the OPR will be maintained at 3.25% and 2.75%, respectively.
BNM said that its decision is attributed to the fact that Malaysia’s economic growth in the second quarter of the year has been affected by slower external demand and a decline in commodity production. As such, the current OPR is considered to be at an appropriate level to support the current economy.
The central bank further noted that moving forward, Malaysia’s growth will continue to be driven by resilient domestic expenditure amidst a challenging external environment and slowing global growth. Some factors that have contributed to the moderation of global growth include a persistently high core inflation and high interest rates, as well as a slower-than-expected growth in China. In addition to that, the escalation of geopolitical tensions and sharp tightening in financial market conditions also played a part.
On the home front, BNM said that Malaysia’s economy and household spend will be buoyed primarily by continued employment and wage growth. Tourist arrivals and spending are also expected to improve significantly, and the continued progress of ongoing infrastructure projects as well as implementation of initiatives announced under various recent national masterplans are expected to accelerate the country’s economic growth as well.
Meanwhile, headline and core inflation have both continued to ease, following more moderate cost conditions. “This moderating trend would likely continue in the second half of 2023, partly reflecting the higher base from the second half of 2022 and continued easing momentum of price increases. Risks to the inflation outlook remain highly subject to changes to domestic policy of subsidies and price controls, global commodity prices, and financial market developments, as well as the degree of persistence in core inflation,” BNM shared in its statement.
Finally, BNM noted that the MPC will continue to monitor and assess ongoing developments to ensure that Malaysia’s monetary policy stance remains conducive to a sustainable economic growth.
For context, BNM has been working on gradually raising Malaysia’s OPR over the past two years in a bid to bring it back up to pre-Covid-19 rates, after reducing it to an all-time low of 1.75% back in 2020. Specifically, year 2022 saw the rate raised up to 2.75%; in May 2023, it was subsequently increased to the current 3.00%.
Subscribe to our exclusive weekly newsletter and we’ll bring you the week’s highlights of financial news, expert tips, guides, and the latest credit card and e-wallet deals.
Stay tuned for what’s to come next in the personal finance world