PETALING JAYA: Bank Negara Malaysia’s (BNM) Monetary Policy Committee (MPC) today maintained the Overnight Policy Rate (OPR) at 1.75%.
“Looking ahead, the growth recovery will strengthen in 2022 driven by the expansion in global demand and higher private sector expenditure, amid improvements in the labour market and continued targeted policy support. The expected reopening of international borders would also provide further support to economic recovery,” BNM said in a statement.
Furthermore, the central bank foresees the economic impact from the rising number of Covid-19 cases will be considerably less severe due to the absence of stringent restrictions. Nonetheless, it acknowledged the risks to the growth outlook remain tilted to the downside due to external and domestic factors, which include a weaker-than-expected global growth, ongoing geopolitical conflicts, worsening supply chain disruptions, and pandemic related developments.
Headline inflation in 2022 is projected to remain moderate as the base effect from fuel inflation continues to dissipate. Meanwhile, underlying inflation as measured by core inflation, is expected to normalise to around its long-term average as economic activity continues to pick up amid the environment of high input costs.
“Nevertheless, core inflation is expected to be modest, with the upside risk partly contained by the continued slack in the economy and labour market.”
BNM believes the inflation outlook continues to be subject to global commodity price developments amid risks from prolonged supply-related disruptions.
On the whole, the MPC considers the current stance of monetary policy to be appropriate and accommodative.
“Fiscal and financial measures will continue to provide support to economic activity. Amid the prevailing uncertainties, the stance of monetary policy will continue to be determined by new data and their implications on the overall outlook for domestic inflation and growth.”
Meanwhile, OCBC Treasury Research expects BNM to only hike rate in the third quarter this year.
“Even then, it is likely to hike by a tame 25bps only – more of a concrete signal that it is paying serious attention to the potential for inflation, rather than a reaction to any actual considerable price pressure,“ said OCBC.
