KUALA LUMPUR, 8 May 2019 – Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to reduce the Overnight Policy Rate (OPR) to 3.00 percent.
The ceiling and floor rates of the corridor for the OPR are correspondingly reduced to 3.25 percent and 2.75 percent respectively.
Bank Negara stated that the baseline projection is for the Malaysian economy to grow within the projected range of 4.3% to 4.8%.
However, there are downside risks to growth from heightened uncertainties in the global and domestic environment, trade tensions and extended weakness in commodity-related sectors.
According to Bank Negara, the domestic financial markets have remained resilient, despite periods of volatility primarily due to global developments.
“While domestic monetary and financial conditions remain supportive of economic growth, there are some signs of tightening of financial conditions. The adjustment to the OPR is therefore intended to preserve the degree of monetary accommodativeness,” it said.
The global economy continues to expand moderately. Growth outcomes for several major economies were better than expected during the first quarter, but underlying economic conditions continue to suggest moderation going forward.
“Although the tightening in global financial conditions has eased somewhat, heightened policy uncertainties could lead to sharp financial markets adjustments, further weighing on the overall look,” Bank Negara stated.
For Malaysia, the latest developments point towards moderate economic activity in the first quarter of 2019.
“Looking ahead, slowing global demand conditions and subdued growth of key trading partners will continue to weigh on the external sector. Domestically, stable labour market conditions and capacity expansion in key sectors will continue to drive household and capital spending,” it said.
For 2019 as a whole, average headline inflation is expected to be broadly stable compared to 2018.
Bank Negara said, the trajectory of headline inflation will continue to be dependent on global oil prices, and underlying inflation is expected to remain stable, supported by the continued expansion in economic activity and in the absence of strong demand pressures.
Headline inflation increased to 0.2% in March 2019 (February: -0.4%), due mainly to the less negative transport inflation at -3.0% (February: -6.8%).
Underlying inflation, as measured by core inflation 1 , remained stable at 1.6% in March 2019.
“In the immediate term, inflation is expected to remain low mainly due to policy measures. These include the price ceiling on domestic retail fuel prices until mid-2019 and the impact of the changes in consumption tax policy on headline inflation,” Bank Negara added.