KUALA LUMPUR (Sept 9): The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has decided to maintain the overnight policy rate (OPR) at 1.75%, marking the seventh consecutive meeting in which the key policy rate is maintained.

The rate was last adjusted following the July 7, 2020 MPC meeting, which saw a 0.25 basis point cut from 2% as at May 5, 2020.

In a statement, the central bank noted the continued recovery in the global economy, supported by improvements in manufacturing and services activities, although the strength of recovery remains varied across countries, mainly in line with their vaccination coverage, relaxation of containment measures and degree of policy support.

"Economies with better progress in their vaccination programmes have eased containment measures, enabling a continued recovery in domestic activity. Sizeable fiscal and monetary stimulus in several major economies continue to support the recovery momentum. Financial conditions also remain supportive of growth.

"Overall, the balance of risks to the global growth outlook is tilted to the downside. This is attributed mainly to uncertainty over the path of the pandemic amid the emergence of variants of concern, and potential risk of heightened financial market volatility amid adjustments in monetary policy in major economies," said BNM.

For Malaysia, the reimposition of nationwide containment measures to curb the resurgence in Covid-19 cases had dampened the growth momentum, although the bank said the recent gradual relaxation for economic sectors to operate and the higher adaptability of firms to the new operating environment and continued policy support would partly mitigate the impact.

It said the further easing of containment measures, rapid progress of the domestic vaccination programme and continued expansion in global demand will support the growth momentum going into 2022.

Risks, however, remain tilted to the downside due to external and domestic factors, including delays in the easing or the reimposition of broad-based containment measures due to the impact of new Covid-19 variants of concern and a weaker-than-expected global growth recovery.

Headline inflation has averaged 2.3% year-to-date, said BNM, projecting it to average between 2% and 3% for 2021.

It expects underlying inflation to remain subdued, averaging between 0.5% and 1.5% for the year, amid continued spare capacity in the economy.

The outlook is subject to the global commodity price developments and policy measures to alleviate the cost burden off the public.

"The MPC considers the stance of monetary policy to be appropriate and accommodative. In addition, fiscal and financial measures will continue to cushion the economic impact on businesses and households and provide support to economic activity.

"Given the uncertainties surrounding the pandemic, the stance of monetary policy will continue to be determined by new data and information and their implications on the overall outlook for inflation and domestic growth. The bank remains committed to utilising its policy levers as appropriate to foster enabling conditions for a sustainable economic recovery," said BNM.