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Malaysia: Bank Negara keeps OPR unchanged at 1.75%
KUALA LUMPUR: Bank Negara Malaysia’s Monetary Policy Committee (MPC) decided to maintain the Overnight Policy Rate (OPR) at its historical low of 1.75%.
In a statement issued on Thursday, it said the cumulative 125 basis points reduction in the OPR this year will continue to provide stimulus to the economy.
“Given the outlook for growth and inflation, the MPC considers the stance of monetary policy to be appropriate and accommodative.
“The bank remains committed to utilise its policy levers as appropriate to create enabling conditions for a sustainable economic recovery, ” it said.
Bank Negara said economic activity continues to recover from the trough in April this year and the improvement is expected to continue into 2021.
It said the latest high frequency indicators show that labour market conditions, household spending and trade activity have continued to improve.
Also supporting the economic recovery are the fiscal stimulus packages, alongside monetary and financial measures.
The second quarter GDP shrank by 17.9%, which was much worse than expected but Bank Negara said the worst was over after the serious impact on the economy in April during the full brunt of the Movement Control Order, which started on March 18, to contain the Covid-19 pandemic.
StarBiz reported Just about a month ago, most economists still believed that the central bank would continue to pursue another OPR cut to aid the economy but this has shifted.
A slim majority of economists polled on Bloomberg now believe that the central bank would keep the interest rate at 1.75% in its meeting today.
“The OPR is now at its historical low and further cuts may not be effective in stimulating demand. There are other ways the government can stimulate demand and spur the economy, ” Dr Yeah Kim Leng, a professor of economics at the Sunway University Business School, told StarBiz.
Below is the Monetary Policy Statement issued by Bank Negara on Thursday:
At its meeting today, the Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 1.75 percent.
The global economy continues to improve, with the easing of containment measures across more economies and strong policy support. The re-opening of production facilities has led to a resumption of manufacturing and trade activity.
However, the recovery in the services sector has been slower. Financial conditions have improved, although risk aversion remains elevated.
The outlook is still subject to downside risks and uncertainty, primarily due to the risk of a resurgence of the pandemic and weaker labour market conditions.
For Malaysia, economic activity continues to recover from the trough in April this year. Latest high frequency indicators show that labour market conditions, household spending and trade activity have continued to improve.
Also supporting the economic recovery are the fiscal stimulus packages, alongside monetary and financial measures.
Looking ahead, the improvement is expected to continue into 2021, supported by the recovery in external demand and expansion in private sector expenditure. However, the pace of recovery will be uneven across sectors, with economic activity in some industries remaining below pre-pandemic levels, and a slower improvement in the labour market.
This outlook is still subject to downside risks, particularly from ongoing uncertainties surrounding the course of the pandemic domestically and globally.
Inflationary pressures are expected to remain muted in 2020. Headline inflation is likely to average negative in 2020 given the substantially lower global oil prices, and average higher in 2021, within the earlier projected ranges.
The outlook, however, will continue to be significantly affected by global oil and commodity prices. Underlying inflation is expected to be subdued amid spare capacity in the economy.
The cumulative 125 basis points reduction in the OPR this year will continue to provide stimulus to the economy. Given the outlook for growth and inflation, the MPC considers the stance of monetary policy to be appropriate and accommodative. The Bank remains committed to utilise its policy levers as appropriate to create enabling conditions for a sustainable economic recovery.
Source: https://www.thestar.com.my/business/business-news/2020/09/10/bank-negara-keeps-opr-unchanged-at-175