KUALA LUMPUR: Bank Negara’s decision to maintain the overnight policy rate (OPR) at 1.75% at its second Monetary Policy Committee (MPC) meeting yesterday suggests that the central bank is confident of economic recovery this year on the back of improving global demand and consumer spending.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid (pic) said nonetheless, the central bank is also cognisant of potential risks against the outlook particularly in light of the varying degrees of economic recovery, globally.

“This would mean the downside risks to the economy will continue to be visible, implying that Bank Negara is mindful and stand ready to respond accordingly.

Sunway University economics professor Dr Yeah Kim Leng said Bank Negara deemed a further cut to the historical low interest rates as unnecessary to support growth despite the implementation of the second movement control order and the still negative headline Consumer Price Index (CPI) inflation early in the year

“In other words, if the present economic condition deteriorates, further reduction in the policy rates could happen to provide support to the economy. This is especially true when there is spare capacity in the economy, indicating that available resources are not optimally used at the present juncture, ” he said.

In July last year, Bank Negara reduced the overnight policy rate to 1.75%, a record low since the floor was set in 2004. It has since maintained the rate.

Mohd Afzanizam said Bank Negara seemed confident that the Malaysian economy would accelerate from the second quarter onwards as the vaccination programme will help its reopening.

Meanwhile, Sunway University economics professor Dr Yeah Kim Leng said Bank Negara deemed a further cut to the historical low interest rates as unnecessary to support growth despite the implementation of the second movement control order and the still negative headline Consumer Price Index (CPI) inflation early in the year. — Bernama