Bank Negara Malaysia Holds Overnight Policy Rate as 3% Inflation Expectations Rise

Bank Negara Malaysia Holds Overnight Policy Rate as Inflation Expectations Rise

𝗕𝗮𝗻𝗸 𝗡𝗲𝗴𝗮𝗿𝗮 𝗠𝗮𝗹𝗮𝘆𝘀𝗶𝗮 𝗛𝗼𝗹𝗱𝘀 𝗢𝘃𝗲𝗿𝗻𝗶𝗴𝗵𝘁 𝗣𝗼𝗹𝗶𝗰𝘆 𝗥𝗮𝘁𝗲 𝗮𝘁 𝟯% 𝗮𝘀 𝗜𝗻𝗳𝗹𝗮𝘁𝗶𝗼𝗻 𝗘𝘅𝗽𝗲𝗰𝘁𝗮𝘁𝗶𝗼𝗻𝘀 𝗥𝗶𝘀𝗲

The Central Bank of Malaysia, Bank Negara Malaysia (BNM), has decided to maintain the overnight policy rate (OPR) at 3% in its latest Monetary Policy Committee (MPC) meeting. This decision was made amid expectations of a rise in inflation, primarily driven by price increases.
Economists predict that inflation will hover within 3% to 3.5% this year, up from 2.5% in 2023. This upward trend is attributed to the fuel subsidy rationalization and increase in tariffs on various essentials. Yeah Kim Leng, an economics professor at Sunway Business School, stated that inflation is unlikely to fall below 3% this year unless it remains below the trend line for a prolonged period.
Data from the Statistics Department shows that the inflation rate was 1.5% and core inflation was 1.9% in December 2023. The annual inflation rate was 2.5% in 2023, down from 3% in 2022.
Affin Hwang Investment Bank Chief Economist, Alan Tan, also expects the central bank to maintain the OPR at its current rate. However, he predicts that the inflation rate could rise as high as 3.5%.

In a statement, BNM said that at the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects. The central bank remains vigilant to ongoing developments to inform its assessment of the outlook for domestic inflation and growth.

This decision by BNM to hold the OPR steady is seen as a cautious move to balance the need to support economic growth while managing inflation expectations. The central bank’s vigilant approach indicates its commitment to monitoring the economic situation closely and making adjustments as necessary to maintain macroeconomic stability.
Source: New Straits Times Malaysia
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