KUALA LUMPUR – Bank Negara Malaysia (BNM), at its third monetary policy committee (MPC) meeting today, has maintained the overnight policy rate (OPR) at 1.75%.
In a statement, the central bank said the MPC considered the stance to be appropriate and accommodative.
“Given the uncertainties surrounding the Covid-19 pandemic, the stance of monetary policy going forward will continue to be determined by new data and information, and their implications for the overall outlook for inflation and domestic growth.”
BNM said it remains committed to utilising its policy levers as appropriate, to foster enabling conditions for a sustainable economic recovery.
For Malaysia, it said, the growth outlook remains subjected to downside risks, stemming mainly from ongoing uncertainties in developments related to the pandemic and potential challenges that could affect the roll-out of vaccines both globally and domestically.
It said the latest indicators point to continued improvements in economic activity in the first quarter and into last month.
“While the recent reimposition of containment measures in selected locations will affect economic activity in the short term, the impact will be less severe, as almost all economic sectors are allowed to operate.”
It said the growth trajectory is projected to improve, driven by stronger recovery in global demand, and increased public and private sector expenditure amid continued support from policy measures.
“Growth will also be supported by higher production from existing and new manufacturing facilities, particularly in the electrical and electronics and primary-related sub-sectors, as well as oil and gas facilities.”
It said the progress of the country’s vaccination programme will lift sentiments and contribute towards economic recovery.
Global economic recovery continues to strengthen, particularly in major economies, supported by improvements in manufacturing and trade activity, although the pace might vary across countries, it said.
It added that the ongoing vaccine roll-out and sizeable fiscal stimulus measures in the United States, as well as policy support in other major economies, will further facilitate improvement in domestic demand.
However, said BNM, the recovery trajectory in some economies may be disrupted by a re-tightening of containment measures to curb Covid-19 resurgences.
Nevertheless, the recent financial market volatility has somewhat receded, it said, and financial conditions remain supportive of growth.
“The balance of risks to the growth outlook remains tilted to the downside, mainly due to uncertainty about the path of the pandemic, as well as the potential risks of heightened financial market volatility.”
It said Malaysia’s headline inflation this year is projected to average higher at between 2.5% and 4.0%, mainly due to the cost-push factor of higher global oil prices.
“In terms of trajectory, headline inflation is anticipated to temporarily spike in the second quarter of 2021, particularly due to a lower base from low domestic retail fuel prices in the corresponding quarter of 2020.
“However, this will be transitory, as headline inflation is projected to moderate thereafter as this base effect dissipates.”
It said underlying inflation, as measured by core inflation, is expected to remain subdued, averaging between 0.5% and 1.5% for 2021 amid continued spare capacity in the economy.
“The outlook, however, is subject to global oil and commodity price developments.” – Bernama, May 6, 2021
