Following the latest Monetary Policy Committee (MPC) meeting, Bank Negara Malaysia (BNM) has announced the retention of the overnight policy rate (OPR) at 3%. This decision marks the fourth consecutive time since July 2023 that the MPC has maintained the rate, following a 25 basis point increase in May of the previous year.
BNM stated, โWith the OPR currently at 3%, our monetary policy stance continues to support the economy. This level aligns with our present assessment of inflation and growth prospects.โ
The MPC is closely monitoring ongoing developments to inform its ongoing assessment of domestic inflation and growth. On the global front, despite most central banks nearing the peak of their tightening cycles, BNM anticipates that monetary policies worldwide are likely to remain stringent in the near term.
However, BNM observed a recent downward trend in global headline and core inflation, though levels continue to exceed the average.
Looking ahead, BNM is optimistic about Malaysia’s economic growth in 2024, bolstered by an anticipated recovery in exports and resilient domestic spending. Factors such as sustained employment and wage growth are expected to support household expenditure. Additionally, tourism is projected to see further improvement in arrivals and spending.
Investment activity in Malaysia is set to gain momentum from the ongoing progress of multi-year projects in both the private and public sectors, along with the implementation of key initiatives under national master plans.
BNM also highlighted potential risks and opportunities that could impact the economic outlook. Downside risks include weaker-than-expected external demand and significant drops in commodity production. Conversely, upsides could arise from a tech sector upcycle, better-than-anticipated tourism activity, and accelerated project implementations.
Despite signs of recovery in the electrical and electronics sector, global trade remains subdued, influenced by a shift in consumer spending from goods to services, persistent trade restrictions, and a modest recovery in China.
In terms of inflation, BNM expects it to remain modest in 2024, averaging around 2.5% in 2023. However, this forecast is subject to changes in domestic policies regarding subsidies and price controls, as well as global commodity prices and financial market developments. โThe government’s planned review of price controls and subsidies in 2024 will play a crucial role in shaping the inflation outlook and demand conditions,โ the central bank concluded.
