BNM maintains Overnight Policy Rate at 1.75%

KUALA LUMPUR – Bank Negara Malaysia (BNM) maintained the Overnight Policy Rate (OPR) at 1.75% at its first Monetary Policy Committee (MPC) meeting, reported Bernama.

The central bank’s MPC considered the stance of monetary policy to be appropriate and accommodative, while remaining committed to utilizing its policy levers as appropriate to create enabling conditions for a sustainable economic recovery, in a statement yesterday.

“Given the uncertainties surrounding the pandemic, the stance of monetary policy going forward will be determined by new data and information, and their implications on the overall outlook for inflation and domestic growth,” said BNM

The central bank said the resurgence in COVID-19 cases and the introduction of the targeted containment measures in Malaysia has affected the recovery momentum in the 4th quarter of 2020 and as a result, growth for 2020 was expected to be near the lower end of the earlier forecast range.

For 2021, the impact will be less severe than that experienced in 2020, while near-term growth will be affected by the re-introduction of stricter containment measures, added BNM.

Furthermore, the growth trajectory was projected to improve from the second quarter onwards, driven by the recovery in global demand, the turnaround in public and private sector expenditure amid continued support from policy measures, and higher production from existing and new manufacturing and mining facilities.

“The rollout of vaccines in the coming months will also lift sentiments. Downside risks to the outlook remain, derived mainly from ongoing uncertainties surrounding the dynamics of the pandemic and potential challenges that might affect the rollout of vaccines both globally and domestically,” added BNM.

Moreover, in line with their early assessments, the average headline inflation is expected to be negative in 2020 mainly due to the substantially lower global oil prices, said the central bank.

“For 2021, headline inflation is projected to average higher, primarily due to higher global oil prices. Underlying inflation is expected to remain subdued amid continued spare capacity in the economy. However, the outlook is subject to global oil and commodity price developments,” said BNM.

In meantime, the central bank said the global economy continued to recover, led by improvements in manufacturing and export activity, but the resurgence of COVID-19 cases and the subsequent containment measures had affected economic activity in several major economies.

The central bank said the expedited rollout of mass vaccination programs, together with ongoing policy support, was expected to lift global growth prospects going forward.

“Financial conditions also remain supportive. The overall outlook remains subject to downside risks, primarily if there is a further resurgence of COVID-19 infections and delays in mass inoculation against COVID-19,” it added.