Bank Negara keeps policy rate at 3.25% amid slower economic growth
PETALING JAYA: Bank Negara Malaysia (BNM) decided to maintain the Overnight Policy Rate (OPR) at 3.25% at its Monetary Policy Committee (MPC) meeting yesterday.
The central bank said in a statement that at the current level of the OPR, the degree of monetary accommodativeness is consistent with the intended policy stance.
“The MPC will continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation,” it added.
BNM noted that for the local economy, the latest indicators point towards continued expansion in private sector activity, while private consumption will remain the main driver of growth, supported by conducive labour market conditions.
“Investment activity is projected to be sustained by continued capacity expansion in key sectors, driven by positive demand and efforts to enhance automation. Public sector spending, however, is likely to weigh on growth, amid continued reprioritisation of expenditure by the government.”
It said recent announcements by the government have provided more clarity on fiscal and economic development policies.
BNM expects exports to provide an additional lift to growth, albeit to a lesser extent due to moderating global momentum.
“The domestic economy continues to face downside risks stemming from any further escalation in trade tensions and prolonged weakness in the mining and agriculture sectors. Nevertheless, on balance, the Malaysian economy is expected to remain on a steady growth path in 2018 and 2019.”
In line with regional economies, BNM said the domestic financial markets continue to experience non-resident portfolio outflows due to global developments, but the financial markets remain orderly with domestic monetary and financial conditions supportive of economic growth.
The central bank said while the impact of the consumption tax policy will contribute to higher headline inflation in 2019, it will lapse towards the end of the year.
MIDF Research said the decision to maintain the policy rate was widely expected and timely as macroeconomic indicators are reflecting moderating signs, especially on the global front. It opined that a change in monetary stance is not required at this juncture as it will affect the trajectory of domestic growth.