BNM Keeps OPR at 3% as Widely Expected

Malaysia’s central bank on Thursday kept the benchmark interest rate unchanged as widely expected, amid resilient economic growth and manageable inflation.

The overnight policy rate (OPR) was maintained at 3% following the Monetary Policy Committee’s two-day meeting, Bank Negara Malaysia (BNM) said in a statement. Earlier, a survey of 22 economists by Bloomberg unanimously called for the central bank to stand pat in the fourth of six reviews scheduled for this year.

“Going forward, exports are expected to be further lifted by the global tech upcycle given Malaysia’s position in the semiconductor supply chain, as well as continued strength in non-electrical and electronics goods,” BNM said. “Tourist arrivals and spending are also poised to rise further.”

Malaysia’s economic growth accelerated in the first three months of 2024, expanding 4.2% year-on-year, thanks to higher household spending, stronger investment activities, and improvement in tourist arrivals.

BNM has kept the policy rate unchanged for more than a year now since it was last raised in May 2023 by 25 basis points. Thursday’s decision mirrors the latest moves by its counterparts in Thailand, Indonesia and the Philippines to also hold their policy rates steady.

“At the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of inflation and growth prospects,” BNM said. The central bank said it remains vigilant to ongoing developments in its assessment of inflation and growth path.

Inflation will pick up in the second half of 2024 amid the recent rationalisation of diesel subsidies, BNM flagged. “Nevertheless, the increase in inflation will remain manageable given the mitigation measures to minimise the cost impact on businesses,” it said.

“Going forward, the upside risk to inflation would be dependent on the extent of spillover effects of further domestic policy measures on subsidies and price controls to broader price trends, as well as global commodity prices and financial market developments,” the central bank noted.

For the year as a whole, the headline inflation rate would range within the earlier projected range of 2% to 3.5% in 2024 while core inflation is expected to come in at 2% to 3%, it added.