KUALA LUMPUR (Nov 3): The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) during the MPC’s final 2021 meeting on Wednesday (Nov 3) decided to maintain the overnight policy rate (OPR) at 1.75% after taking into account that risks to Malaysia’s economic growth outlook remain tilted to the downside on external and domestic factors amid lingering Covid 19 pandemic concerns and as the central bank expects the country’s inflation to remain moderate.
BNM said in a statement on Wednesday that risks to Malaysia’s economic growth outlook include weaker-than-expected global economic growth, worsening supply-chain disruptions and the reimposition of containment measures due to the impact of new Covid-19 variants of concern.
"For Malaysia, economic activity weakened in the third quarter amid the imposition of nationwide containment measures to curb the resurgence in Covid-19 cases. However, in line with the relaxation of restrictions, latest high-frequency indicators showed that economic activity had recovered from the trough in July.
"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.
"In line with earlier assessments, headline inflation is likely to average within the projected range of between 2% and 3% for 2021, having averaged 2.3% year to date. Underlying inflation, as measured by core inflation, is expected to average below 1% for the year.
"Moving into 2022, headline inflation is projected 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,” BNM added.
The central bank said the MPC considered the stance of the bank's monetary policy to be appropriate and accommodative.
In addition, Malaysia’s fiscal and financial measures will continue to cushion the economic impact on businesses and households and provide support to economic activity, according to BNM.
"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.” the central bank added.
Globally, BNM said that although the global economy remains on a recovery path, driven by expansion in manufacturing and services activity, the balance of risks to global economic growth outlook also remains tilted to the downside.
This is attributed mainly to uncertainties surrounding the emergence of Covid-19 variants of concern, the risk of more prolonged global supply-chain disruptions and potential risk of heightened financial market volatility amid adjustments to monetary policy in major economies.
"Amid continued strength in global demand, supply chain disruptions, higher commodity prices and labour shortages, inflation has also risen. Nevertheless, global growth prospects will be supported by further progress in vaccination coverage and relaxation of [Covid-19-driven] containment measures.
"In several major economies, sizeable fiscal and monetary policies will continue to support the recovery momentum,” the central bank added.
The OPR at 1.75% is the lowest on record, according to BNM data, which dates back to 2004 on the central bank’s website.
The OPR has been maintained at 1.75% since July 7, 2020, when BNM cut the rate from 2%.
The OPR rose to its highest on record at 3.5% on April 26, 2006, when the central bank raised the rate from 3.25%.
The OPR was subsequently maintained at 3.5% until Oct 24, 2008, according to BNM data.