Overnight Policy Rate Maintained At 1.75%
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Bank Negara Malaysia (BNM) has decided to maintain the overnight policy rate (OPR) at 1.75% at its Monetary Policy Committee meeting today. The OPR of 1.75% is the lowest on Malaysian record and has been maintained at this rate since July 2020.

According to BNM, better-than-expected economic activity in the first quarter of 2021 continued into April, but the re-imposition of nationwide containment measures will dampen the growth momentum. However, continued allowances for essential economic sectors to operate and higher adaptability to remote work, automation, and digitalisation will partly mitigate the impact of restrictions.

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“Going forward, the gradual relaxation of containment measures, alongside the rapid progress of the domestic vaccination programme and continued strength in external demand will provide support for the growth recovery into 2022,” the central bank said. “The growth outlook, however, remains subject to significant downside risks, due mainly to factors that could lead to a delay in the easing of containment measures or imposition of tighter containment measures, and a weaker-than-expected global growth recovery.”

Headline inflation spiked recently, as expected due to the base effect from low fuel prices in the second quarter of last year. However, this spike is transitory and headline inflation is projected to moderate in the near term as this base effect dissipates. “For 2021 as a whole, headline inflation is projected to average closer to the lower bound of the forecast range,” said BNM. “Underlying inflation, as measured by core inflation, is expected to remain subdued, averaging between 0.5% and 1.5% for the year, amid continued spare capacity in the economy.”

(Source: BNM)

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