PETALING JAYA: Bank Negara Malaysia (BNM) maintained the Overnight Policy Rate (OPR) at 3% at its Monetary Policy Committee (MPC) meeting today, following a 0.25% reduction last May.
The central bank said it will continue to assess the balance of risks to domestic growth and inflation, to ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability.
“At the current level of the OPR, the stance of monetary policy remains accommodative and supportive of economic activity,” it said in a statement today.
BNM said the economy grew within expectations in the first quarter of the year, supported by both domestic and external factors.
“The baseline projection remains within the range of 4.3-4.8% (for 2019). This projection, however, is subject to downside risks from ongoing uncertainties in the global and domestic environment, worsening trade tensions and extended weakness in commodity-related sectors,” said BNM.
The central bank expects economic growth to be supported by domestic demand as external sector performance is likely to be weighed down by slower global growth and trade tensions.
Household and capital spending is expected to be driven by stable labour market conditions and capacity expansion in key sectors such as manufacturing and services.
While headline inflation has remained low in the recent period, it is projected to rise in the coming months as the impact of the changes in consumption tax policy lapses.
For 2019 as a whole, the central bank expects average headline inflation to be broadly stable compared to 2018.
“The trajectory of headline inflation will be dependent on global oil prices and policy measures such as the timing of the lifting of the price ceiling on domestic retail fuel prices. Underlying inflation is expected to remain stable, supported by the continued expansion in economic activity and in the absence of strong demand pressures,” BNM added.
Meanwhile, BNM said the global economy is expanding moderately, with labour conditions in advanced economies remaining firm while growth in Asia continues to be supported by domestic demand.
“Leading indicators, however, point to a softening of the near term global economic outlook, with considerable downside risks remaining primarily from prolonged trade tensions.”
While the prospects of monetary easing in the major economies have somewhat eased global financial conditions, the central bank noted that heightened policy uncertainty could lead to excessive financial market volatility.
