BANK Negara Malaysia (BNM) has decided to keep the Overnight Policy Rate (OPR) unchanged at 3%, a move that aligns with economists’ predictions.
The central bank's key interest rate has remained steady since May 2023, with the latest decision emphasising that the current rate is “supportive of the economy” and consistent with its assessment of both inflation and growth prospects.
In its latest monetary policy statement released today, BNM conveyed confidence in the strength of Malaysia's economic activity moving into 2025, driven by robust domestic demand.
The central bank highlighted that while external uncertainties persist, key factors such as employment and wage growth, along with policy measures like the upward revision of minimum wages and civil servant salaries, are expected to support household spending.
"Employment and wage growth, as well as policy measures, including the upward revision of the minimum wage and civil servant salaries, will support household spending," the statement read.
BNM also forecast that investment activity in Malaysia will continue to expand at a strong pace, underpinned by the ongoing progress of multi-year projects in both the public and private sectors.
The central bank expects the strong realisation of approved investments and the continued implementation of catalytic initiatives under national master plans to sustain this growth.
However, the bank acknowledged the considerable uncertainties surrounding global growth, inflation, and trade. It pointed to potential risks related to tariff policies and geopolitical developments from major economies, which could result in a more moderate pace of growth in Malaysia’s exports.
“The growth outlook is subject to downside risks from an economic slowdown in major trading partners, following significant uncertainties surrounding trade policies and lower-than-expected commodity production,” the central bank stated.
Despite these external risks, the central bank indicated that certain factors, including the global tech upcycle, growth in non-electrical and electronics sectors, and increased tourist spending, are expected to offer support to Malaysia's economic performance.
"Meanwhile, growth could be lifted by greater spillovers from the global tech upcycle, more robust tourism activity, and faster implementation of investment projects," BNM added.
On inflation, the central bank projected that the rate would remain manageable in 2025, benefiting from easing global cost conditions and the absence of significant domestic demand pressures.
However, the central bank acknowledged that there could be potential upside risks to inflation, depending on the spillover effects of domestic policy measures and developments in global commodity prices, financial markets, and trade policies.
“Upside risk to inflation would be dependent on the extent of spillover effects of domestic policy measures, as well as external developments surrounding global commodity prices, financial markets, and trade policies,” BNM added.
The central bank stated that while global uncertainties remain a concern, the decision to maintain the OPR at 3% reflects its confidence in Malaysia’s economic resilience, supported by domestic demand, wage growth, and strong investment activity.
The central bank’s approach to monitoring inflation and growth dynamics is aimed at sustaining Malaysia's economic stability in the face of evolving global challenges. – March 6, 2025
