KUALA LUMPUR (Jan 24): Malaysia’s headline interest rate, the overnight policy rate (OPR), has been maintained at 3% following the Monetary Policy Committee (MPC) meeting on Wednesday, said Bank Negara Malaysia (BNM).

This is the fourth time that the MPC has decided to maintain the OPR at 3% since July 2023. The headline rate was raised by 25 basis points in May last year.

“At the current OPR level, the monetary policy stance remains supportive of the economy, and is consistent with the current assessment of inflation and growth prospects,” BNM said.

The MPC remains vigilant to ongoing developments to inform the assessment of the outlook for domestic inflation and growth, the central bank added.

“On the global front, while the monetary policy stance is likely to remain tight in the near term, the tightening cycle has peaked for most central banks,” BNM said in a statement.

However, global headline and core inflation edged downwards in recent months, but continued to be above average, it added.

For Malaysia, economic growth “is expected to improve in 2024”, supported by recovery in exports and resilient domestic expenditure.

“Continued employment and wage growth remain supportive of household spending. Tourist arrivals and spending are expected to improve further.

“Investment activity would be supported by continued progress of multi-year projects in both the private and public sectors, and implementation of catalytic initiatives under the national master plans,” the central bank said.

Concurrently, downside risks are weaker-than-expected external demand and larger declines in commodity production, while upside risks stem from greater spillover from the tech sector upcycle, stronger-than-expected tourism activity, and speedier project roll-outs.

BNM noted further signs of recovery in the electrical and electronics sector, but “global trade remains soft” amid a shift in spending from goods to services, ongoing trade restrictions, and modest recovery in China.

While inflation is seen to be modest in 2024, after averaging 2.5% in 2023, BNM said the outlook is subject to “changes to domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments”.

“The government’s intention to review price controls and subsidies in 2024 will affect the outlook for inflation and demand conditions,” the central bank said.