Bank Negara Malaysia Keeps OPR at 3% to Support Economic Growth
Bank Negara Malaysia (BNM) has decided to maintain the Overnight Policy Rate (OPR) at 3%, as widely anticipated, following its two-day Monetary Policy Committee (MPC) meeting. This decision reflects the central bank’s confidence in Malaysia’s strong economic fundamentals and manageable inflation outlook.
A Supportive Monetary Policy Stance
The OPR has remained unchanged since May 2023, when BNM raised it by 25 basis points to 3%. According to the central bank, this level of interest rate is appropriate to balance price stability with the need to foster sustainable economic growth.
In its statement, BNM noted:
- “The monetary policy stance remains supportive of the economy and consistent with the current assessment of inflation and growth prospects.”
- The MPC remains vigilant to global and domestic developments and will ensure monetary policy supports sustainable growth amid price stability.
Optimistic Growth Projections for 2025
1. Economic Resilience
Malaysia’s economy is forecasted to remain strong in 2025, underpinned by resilient domestic expenditure supported by:
- Employment growth.
- Wage increases.
- Government policy measures, including higher minimum wages and civil-servant salary adjustments.
2. Investment Momentum
BNM emphasized investment activity as a key driver of growth, with contributions from:
- Multi-year infrastructure projects.
- Realization of approved foreign direct investments (FDI).
- National master plans and catalytic initiatives aimed at boosting productivity and capacity.
3. Spillover Effects
Economic growth may surpass expectations due to:
- The technology upcycle boosting manufacturing and exports.
- Robust tourism activity attracting higher international arrivals.
- Faster implementation of critical investment projects.
Inflation Remains Under Control
Headline and core inflation, which averaged 1.8% in 2024, are expected to remain manageable in 2025 due to:
- Easing global cost conditions.
- The absence of excessive domestic demand pressures.
BNM projects that the impact of domestic policy reforms on inflation will remain contained. However, risks could arise from:
- Global commodity price volatility.
- Spillover effects from domestic policy measures.
- Financial market developments.
Challenges Ahead
While the growth outlook is promising, BNM highlighted several downside risks, including:
- Slowing demand from major trading partners.
- Potential trade and investment restrictions.
- Uncertainty surrounding commodity production levels.
Financial market volatility could also increase due to global policy uncertainties.
Ringgit Outlook
BNM noted that the ringgit’s performance will continue to be influenced by external factors. However, the narrowing interest rate differentials between Malaysia and advanced economies, alongside domestic structural reforms, are expected to provide long-term support for the currency.
The central bank assured that Malaysia’s economic prospects and policy measures would sustain confidence in the ringgit despite global market volatility.
Conclusion
Bank Negara Malaysia’s decision to maintain the OPR at 3% underscores its confidence in the country’s economic resilience and inflation management. With strong growth prospects driven by investments, robust domestic spending, and a recovering global economy, Malaysia is poised for a positive economic trajectory in 2025.
However, vigilance is warranted as uncertainties in global markets, trade policies, and commodity prices may present challenges moving forward.
