BNM maintains OPR at 3.25%, lower inflation expected this year

PETALING JAYA: Bank Negara Malaysia (BNM) decided to maintain the Overnight Policy Rate (OPR) at 3.25% at its Monetary Policy Committee (MPC) meeting today after a 25-basis-point hike in January.
The central bank said in a statement that at the current level of the OPR, the degree of monetary accommodativeness is consistent with the policy stance to ensure that the domestic economy continues on a steady growth path amid lower inflation.
"The MPC will continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation."
BNM expects inflation is to average lower this year in anticipation of a smaller effect from global cost factors, while a stronger ringgit exchange rate compared with 2017 will mitigate import costs.
"Global energy and commodity prices are expected to trend higher in 2018, but at a more moderate pace relative to the previous year."
Despite that, the central bank said the trajectory of headline inflation will be dependent on future global oil prices, which remain highly uncertain.
"Underlying inflation, as measured by core inflation, is also projected to moderate due to improving labour productivity and ongoing investments for capacity expansion."
On economic growth, BNM said it will be sustained by the positive global growth outlook and spillovers from the external sector to the domestic economy, with domestic demand being the key driver of growth, underpinned by favourable income and labour market conditions, spending on new and ongoing infrastructure projects and sustained capital investment by firms in the manufacturing and services sectors.
"With additional impetus from the external sector, growth is expected to remain strong in 2018."
he central bank also noted that the domestic financial markets have been resilient and the broad appreciation of the ringgit in the past year better reflects the economic fundamentals.
“Banking system liquidity remains sufficient with financial institutions continuing to operate with strong capital and liquidity buffers. The growth of financing to the private sector has been sustained and is supportive of economic activity.”