[UPDATED] BNM raises OPR by 25 basis points

KUALA LUMPUR –  Bank Negara Malaysia (BNM) has lifted the overnight policy rate (OPR) by another 25 basis points to 2.25%, following its Monetary Policy Committee (MPC) meeting today.

In a statement today, the central bank said the ceiling and floor rates of the corridor of the OPR are correspondingly increased to 2.50% and 2.00%, respectively. 

“The reopening of the global economy and the improvement in labour market conditions continue to support the recovery of economic activity,” BNM said.

“However, these have been partly offset by the impact of rising cost pressures, the military conflict in Ukraine, and strict containment measured in China.  

“Inflationary pressures have continued to increase mainly due to elevated commodity prices and strong demand conditions, despite some easing in global supply chain conditions.” 

Amid the positive growth prospects for the Malaysian economy, BNM said, the MPC decided to further adjust the degree of monetary accommodation.  

“This is consistent with the MPC’s view that the unprecedented conditions that necessitated a historically low OPR have continued to recede. 

“At the current OPR level, the stance of monetary policy remains accommodative and supportive of economic growth.” 

As for Malaysian economy, economic activity has continued to strengthen in recent months, supported by the transition to endemicity. 

In the labour market, the unemployment rate declined further, with higher labour participation and improving income prospects.  

“Looking ahead, while external demand is expected to moderate, weighed by headwinds to global growth, economic growth will be supported by firm domestic demand.

“Additionally, the reopening of international borders since April 1, 2022 would facilitate the recovery in tourism-related sectors. 

“Investment activity and prospects continue to be supported by the realisation of multi-year projects.” 

However, BNM said that downside risks to growth continue to stem from weaker-than-expected global growth, further escalation of geopolitical conflicts, and worsening supply chain disruptions.

Additionally, BNM expects core inflation to average between 2.0% and 3.0% in 2022 as demand continues to improve amid the high-cost environment. 

“Underlying inflation, as measured by core inflation, is expected to average between 2% and 3% in 2022 as demand continues to improve amid the high-cost environment. 

“Nevertheless, the extent of upward pressures on inflation will remain partly contained by existing price controls, fuel subsidies and continued spare capacity of the economy. 

“The (Malaysian) inflation outlook continues to be subject to global commodity price developments, arising mainly from the ongoing military conflict in Ukraine and prolonged supply-related disruptions, as well as domestic policy measures.” – The Vibes, July 6, 2022