11 May - 2 min read
The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has decided to increase the overnight policy rate (OPR) by 25 basis points, raising it from 1.75% to 2.00%. Accordingly, the ceiling and floor rates of the corridor of the OPR are also adjusted to 2.25% and 1.75%, respectively.
This marks the first time that the central bank has raised the OPR since it fell to a historical low of 1.75% back in July 2020. Subsequently, BNM held the OPR steady at that rate for nine consecutive MPC meetings until today.
In its statement released today, BNM said that the decision is prompted by latest indicators that show Malaysia’s growth to be on a firmer footing. This is driven by strengthened domestic demand amid sustained export growth.
“The labour market is further lifted by lower unemployment rate, higher labour participation, and better income prospects. The transition to endemicity [for Covid-19] on 1 April 2022 would strengthen economic activity, in line with further easing of restrictions and the reopening of international borders,” the central bank further said. Additionally, it noted that investment activities and prospects have also improved, supported by the realisation of multi-year projects and positive growth outlook.
Despite these positive prospects, however, BNM also cautioned that risks to the country’s growth are still apparent. These include a weaker-than-expected global growth, further escalation of geopolitical conflicts, worsening supply chain disruptions, and adverse developments surrounding Covid-19.
Ultimately, BNM said that after assessing the situation, it has decided to begin reducing the degree of monetary accommodation. “This 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,” it stated.
Malaysia’s OPR has been reduced by a total of 125 basis points since the start of the Covid-19 pandemic. It originally stood at 3.00% pre-pandemic, but was subsequently pared down to 2.75% in January 2020, 2.50% in March 2020, 2.00% in May 2020, and finally 1.75% in July 2020.
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