Bank Negara Malaysia’s Monetary Policy Committee has decided to keep the Overnight Policy Rate (OPR) at 3.00 percent amid global economic challenges, including elevated core inflation and slower growth in China. Malaysia’s domestic-oriented sectors and infrastructure projects are expected to drive growth, with inflation likely to continue moderating in the second half of 2023.
7 September 2023 – In a decision made today, the Monetary Policy Committee (MPC) of Bank Negara Malaysia has opted to maintain the Overnight Policy Rate (OPR) at its existing level of 3.00 percent. This move is emblematic of the central bank’s commitment to navigating the intricacies of the global economic landscape amidst a backdrop of varying challenges and opportunities.
As the world grapples with evolving economic dynamics, the MPC has assessed the state of affairs both domestically and internationally. On the global stage, economic expansion persists, driven by resilient domestic demand, underpinned by robust labor market conditions. However, this vigor is counterbalanced by enduring core inflation pressures and higher interest rates. The transformation of spending from goods to services, coupled with the ongoing downturn in the electrical and electronics (E&E) sector, continues to impact global trade. Additionally, the sluggish growth in China casts a shadow on the global economic horizon.
In Malaysia, the second quarter of the year saw growth impacted by weakened external demand and a dip in commodity production. Nevertheless, the nation remains on a growth trajectory, primarily buoyed by steadfast domestic expenditure amidst the challenging global environment. Key drivers include ongoing employment and wage growth, particularly within sectors geared towards domestic consumption, an anticipated uptick in tourist arrivals and spending, and sustained credit growth in favorable domestic financial conditions. The implementation of multi-year infrastructure projects and catalytic initiatives under the newly unveiled national master plans are poised to bolster investment activity. However, downside risks loom in the form of sluggish external demand and prolonged commodity production declines, while upside prospects stem from tourism resilience, a stronger E&E sector rebound, and accelerated project implementation.
Turning to inflation, both headline and core indicators are displaying a persistent moderation trend, expected to continue in the second half of 2023. Factors influencing this trajectory encompass alterations in domestic policy regarding subsidies and price controls, global commodity price fluctuations, and developments in financial markets, along with the persistence of core inflation.
The decision to maintain the OPR at 3.00 percent aligns with the MPC’s strategic vision of supporting the Malaysian economy. It reflects the committee’s assessment of the prevailing inflation and growth outlook. The MPC emphasizes its unwavering vigilance, pledging to remain attuned to unfolding developments and to adapt the monetary policy stance as needed. This commitment is underpinned by the overarching goal of fostering sustainable economic growth while upholding price stability.