“While the stance remains accommodative now, Bank Negara Malaysia will consider ‘reviewing the current degree of monetary accommodation’.” Bank Negara Malaysia on retaining the Overnight Policy Rate

KUALA LUMPUR: Bank Negara Malaysia left the Overnight Policy Rate (OPR) unchanged at three per cent yesterday, but said it will likely review the policy next year.

Economists are pencilling in a 0.25 per increase next year, saying the move would be in line with the normalising efforts in the region.

The central bank said while the stance remained accommodative now, it considered “reviewing the current degree of monetary accommodation”.

“This is to ensure the sustainability of the growth prospects of the economy,” it said without elaborating.

The Monetary Policy Committee (MPC), in its last meeting of the year, projected a strong growth next year. The MPC also approved the schedule of meetings for next year.

With domestic demand as the engine of growth, private consumption will remain the largest driver of growth, supported by continued improvements in income and overall labour market conditions.

“Investment will be sustained by infrastructure projects and higher capital investment in the manufacturing and services sectors,” it said, adding that the external sector would be additional impetus to the economy.

UOB Bank economist Julia Goh said the 2018 Budget would provide continuous support for consumer spending.

“We are pencilling in a 25 basis points increase, more likely to be in the second quarter or later.”

On Bank Negara’s hawkish shift towards normalising policy, Maybank FX Research said: “This shift has lifted the ringgit slipping to a low of 4.2060 versus the dollar and could keep the ringgit supported ahead.”

Bank Negara said headline inflation next year was projected to moderate on expectations of a smaller effect from global cost factors.

“The trend of headline inflation will be dependent on future global oil prices, which remain highly uncertain. Underlying inflation, as measured by core inflation, will be sustained by robust domestic demand.”

This year’s headline inflation is expected to be at the upper end of the three to four per cent forecast range.

Bank Negara said the domestic financial markets had been resilient, adding that the ringgit had strengthened to better reflect the economic fundamentals. Rupa Damodaran