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Malaysia: Bank Negara maintains OPR at 1.75%
PETALING JAYA: In line with market predictions, Bank Negara left the overnight policy rate (OPR) unchanged at 1.75%, following the Monetary Policy Committee (MPC) meeting.
This is the sixth consecutive MPC meeting in which the OPR has been retained at the record-low level.
The last time the benchmark rate was revised was in July 2020, when the OPR was cut by 25 basis points from 2% to 1.75%.
In a statement yesterday, Bank Negara said the stance of monetary policy currently remains appropriate and accommodative, while fiscal and financial measures would continue to provide support to economic activities.
“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 utilise its policy levers as appropriate to foster enabling conditions for a sustainable economic recovery, ” it said.
The central bank pointed out that while latest economic indicators, particularly on exports, retail spending and labour market conditions, have shown better-than-expected performance, the re-imposition of nationwide Covid-19 containment measures would dampen growth momentum.
Nevertheless, it said continued allowances for essential economic sectors to operate, albeit at a reduced capacity, and higher adaptability to remote work, automation and digitalisation will partly mitigate the impact of restrictions.
“Going forward, the gradual relaxation of containment measures, alongside the rapid progress of the domestic vaccination programme and continued strength in external demand will provide support for the growth recovery into 2022.
“The growth outlook, however, remains subject to significant downside risks, due mainly to factors that could lead to a delay in the easing of containment measures or imposition of tighter containment measures, and a weaker-than-expected global growth recovery, ” it added.
On headline inflation, Bank Negara said it is projected to moderate in the near term as the base effect dissipates.
This was despite a “transitory” headline inflation spike recently due mainly to the base effect from low fuel prices in the second quarter of last year.
“For 2021 as a whole, headline inflation is projected to average closer to the lower bound of the forecast range.
“Underlying inflation, as measured by core inflation, is expected to remain subdued, averaging between 0.5% and 1.5% for the year, amid continued spare capacity in the economy, ” according to Bank Negara.
In a note issued yesterday, OCBC Bank economist Wellian Wiranto said Bank Negara’s tone on the economic outlook has turned “less upbeat” compared with the MPC statement in May.
This is largely because the restriction measures have been tighter and extended since May.
“To us, the risk that the containment measures might last significantly longer than originally expected or ramped up in some ‘hotspot’ areas like Selangor remains real, given the still-unchecked increase in daily cases.
“Hence, as much as we hope the situation will improve over the next few weeks such that Malaysia can step into a recovery mode forcefully without any hiccup again, the reality is unlikely to be so straightforward.
“Hence, we continue to see the potential for Bank Negara to do what it can to help growth along by easing its OPR by 25 basis points, ” he said.
Source: https://www.thestar.com.my/business/business-news/2021/07/09/bank-negara-maintains-opr-at-175