KUALA LUMPUR, 22 January 2020 – The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has reduced the Overnight Policy Rate (OPR) from 3.00% to 2.75%, in a pre-emptive measure to secure the improving growth trajectory amid price stability.
At this current level of the OPR, the MPC considers the stance of monetary policy to be appropriate in sustaining economic growth with price stability.
“The global economy continues to expand at a moderate pace. Latest indicators and the recent dissipation of trade tensions point to improving global trade activity,” BNM said in its Monetary Policy Statement.
Following the reduction in the OPR, the ceiling and floor rates of the corridor of the OPR are correspondingly reduced to 3.00 percent and 2.50 percent, respectively.
According to BNM, the downside risks remain due to geopolitical tensions and policy uncertainties in a number of countries. This could cause a resurgence of financial market volatility and weigh on the global growth outlook.
For the Malaysia economy in 2020, growth is expected to gradually improve, with continued support from household spending and better export performance. Overall investment activity is expected to record a modest recovery, underpinned by ongoing and new projects, both in the public and private sectors.
“However, downside risks to growth remain. These include uncertainty from various trade negotiations, geopolitical risks, weaker-than-expected growth of major trade partners, heightened volatility in financial markets, and domestic factors that include weakness in commodity-related sectors and delays in the implementation of projects,” BNM stated.
Headline inflation averaged at 0.7% in 2019. In 2020, headline inflation is expected to average higher but remain modest.
“The trajectory of headline inflation will be dependent on global oil and commodity price developments and the timing of the lifting of the domestic retail fuel price ceilings,” it stated.
In addition, BNM said that the underlying inflation is expected to remain broadly stable, reflecting the continued expansion in economic activity and the absence of strong demand pressures.