6th July 2022 - 2 min read
The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has increased the overnight policy rate (OPR) by another 25 basis points, bringing it from 2.00% to 2.25%. This will be the second time that the central bank is raising the OPR this year, after having bumped it up once in May 2022 from the historic low of 1.75%.
In its statement, BNM shared that the decision was made as Malaysia’s economic activity has continued to strengthen in recent months. This was signalled by exports and retail spending indicators, an improving employment market, as well as improving income prospects.
“Amid the positive growth prospects for the Malaysian economy, the MPC decided to further adjust the degree of monetary accommodation. This is consistent with the MPC’s view that the unprecedented conditions that necessitated a historically low OPR have continued to recede,” BNM shared.
The central bank also added that moving forward, it expects external demand to moderate due to various reasons, including weaker-than-expected global growth, supply chain disruptions, adjustments to foreign monetary policies to combat inflation, as well as the Russia-Ukraine conflict. Despite that, Malaysia’s economic recovery will be firmly underpinned by domestic demand.
“Additionally, the reopening of international borders since 1 April 2022 would facilitate the recovery in tourism-related sectors. Investment activity and prospects continue to be supported by the realisation of multi-year projects,” BNM further shared in its statement.
Ultimately, BNM concluded that with the new OPR, the stance of monetary policy remains accommodative and supportive of economic growth. “The MPC will continue to assess evolving conditions and their implications on the overall outlook to domestic inflation and growth. Any adjustments to the monetary policy setting going forward will be done in a measured and gradual manner, ensuring that monetary policy remains accommodative to support a sustainable economic growth in an environment of price stability.”
For context, Malaysia’s OPR had languished at 1.75% for almost two years since it was brought down to the all-time low level in July 2020. Prior to that, the OPR also saw multiple cuts in January, March, and May 2020.
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