3rd November 2021 - 2 min read
The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has opted to maintain the overnight policy rate (OPR) at 1.75% in its final 2021 meeting today. This marks the eighth time the MPC has decided to hold the key policy rate at its current rate of record low since July 2020.
BNM clarified that the decision was made after taking into account downside risks that continue to persist with regard to Malaysia’s economic growth outlook, especially amidst lingering Covid-19 concerns.
“Going into 2022, the growth momentum is expected to improve, supported by expansion in global demand, higher private-sector expenditure in line with the resumption of economic activity, and continued policy support. Risks to the growth outlook, however, remain tilted to the downside due to external and domestic factors,” BNM shared. Some of such risks include weaker-than-expected global economic recovery, worsening supply chain disruptions, and the reimposition of containment measures due to new Covid-19 variants.
Additionally, the central bank also expects the country’s inflation to remain moderate. “As economic activity normalises, core inflation is expected to edge upwards but remain benign given the continued spare capacity in the economy and slack in the labour market. The outlook, however, continues to be subject to global commodity price developments and some risk from prolonged supply-related disruptions,” it said.
More specifically, BNM expects headline inflation to average within the projected range of between 2% and 3% for 2021, having remained at 2.3% year to date. Meanwhile, underlying inflation will likely average below 1% for the year.
BNM also emphasised that the MPC considered the stance of the bank’s monetary policy to be both appropriate and accommodative. Moreover, it believes that Malaysia’s fiscal and financial measures will continue to help mitigate some of the economic impact on businesses and households, as well as provide the necessary support.
“Given the uncertainties surrounding the pandemic, the stance of monetary policy will continue to be determined by new data and information, and their implications for the overall outlook for inflation and domestic growth. The bank (BNM) remains committed to utilising its policy levers as appropriate to foster enabling conditions for a sustainable economic recovery,” BNM further said.
In 2020, BNM had cut the OPR by four times, reducing it from 3.0% to 2.75% in January, then to 2.5% in March and 2.0% in May. Finally, in July 2020, the OPR was brought to its current record low of 1.75%.
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