KUALA LUMPUR – Bank Negara Malaysia (BNM) has retained the Overnight Policy Rate (OPR) at 1.75% at the sixth and final Monetary Policy Committee (MPC) meeting of the year.
The central bank has kept the policy rate unchanged since July 2020.
In a statement issued after the meeting today, BNM said headline inflation is likely to average within the projected range of 2.0% to 3.0% for 2021, having averaged 2.3% year-to-date.
Underlying inflation, as measured by core inflation, is estimated to average below 1.0% this year.
Headline inflation is projected to remain moderate next year, BNM said.
It said core inflation is expected to edge upwards but remain benign given the continued spare capacity in the economy and slack in the labour market.
“The outlook, however, continues to be subject to global commodity price developments and some risk from prolonged supply related disruptions,” it added.
BNM said that going into 2022, Malaysia’s growth momentum is expected to improve, riding on expansion in global demand, higher private sector expenditure amid resumption of economic activity and continued policy support.
“Risks to the growth outlook, however, remain tilted to the downside due to external and domestic factors.
“These include a weaker-than-expected global growth, a worsening in supply chain disruptions, and the reimposition of containment measures due to the impact of new COVID-19 variants of concern,” it said.
The central bank said global economy remains on a recovery path following the expansion in manufacturing and services activity.
“Amid continued strength demand, supply chain disruptions, higher commodity prices and labour shortage, inflation has also risen.
“Nevertheless, global growth prospects will be supported by further progress in vaccination coverage and relation of containment measures,” it said, adding that sizeable fiscal and monetary policies in major economies will continue to support the recovery momentum.
Overall, BNM said, the balance of risks to the global growth outlook remains tilted to the downside, mainly attributed to the uncertainty surrounding the emergence of variants of concern, the risk of more prolonged global supply chain disruptions, and potential risk of heightened financial market volatility amid adjustments in monetary policy.
“The MPC considers the stance of monetary policy to be appropriate and accommodative.
“In addition, fiscal and financial measures will continue to cushion the economic impact on businesses and households and provide support to economic activity,” it said.
BNM said given the uncertainties surrounding the pandemic, the stance of monetary policy will continue to be determined by new data and information and their implications on the overall outlook for inflation and domestic growth.
“The bank remains committed to utilise its policy levers as appropriate to foster enabling conditions for a sustainable economic recovery,” it added.