The Monetary Policy Committee (MPC) of Bank Negara Malaysia has decided to maintain the Overnight Policy Rate (OPR) at 3.00 percent. The global economy continues to expand, but faces persistent core inflation and higher interest rates, while Malaysia’s growth is driven by resilient domestic demand. Headline and core inflation are projected to trend lower, and the monetary policy stance remains supportive of sustainable economic growth.
KUALA LUMPUR. 6 July 2023 – The Monetary Policy Committee (MPC) of Bank Negara Malaysia has announced its decision to maintain the Overnight Policy Rate (OPR) at 3.00 percent. This move comes amidst a resilient global economy, but with persistent core inflation and higher interest rates impacting growth.
As the global economy continues to expand, supported by strong domestic demand and labor market conditions, the pace of recovery has slowed in recent months. Persistent core inflation and higher interest rates weigh on global growth, while China’s reopening remains a positive factor. Headline inflation has moderated globally, but core inflation remains above historical averages. With most central banks likely to maintain a tight monetary policy stance, the growth outlook remains exposed to downside risks, including slower momentum in major economies, higher-than-anticipated inflation, geopolitical tensions, and tightening financial market conditions.
In Malaysia, following a strong first-quarter performance, the economy has experienced a more moderate pace of growth due to slower external demand affecting exports. Resilient domestic demand, driven by favorable labor market conditions, is expected to continue driving growth. Improving tourist arrivals and rising tourism-related activities, along with investment supported by infrastructure projects, contribute to the growth outlook. Domestic financial conditions remain conducive to financial intermediation with sustained credit growth. Although the growth outlook is exposed to downside risks from weaker global growth, potential upside risks include stronger-than-expected tourism activity and faster project implementation.
Headline inflation in Malaysia has eased due to lower cost factors, while core inflation remains elevated compared to the long-term average due to lingering demand and cost factors. For the second half of 2023, both headline and core inflation are projected to trend lower, aligned with expectations. Risks to the inflation outlook depend on the persistence of core inflation, changes to domestic policies on subsidies and price controls, as well as global commodity prices and financial market developments.
The current OPR level maintains a slightly accommodative monetary policy stance, supporting the Malaysian economy. The MPC remains vigilant and will monitor incoming data to assess the outlook for domestic inflation and growth. The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth while maintaining price stability.