KUALA LUMPUR: Bank Negara Malaysia has decided to maintain the Overnight Policy Rate (OPR) at 1.75 per cent at its Monetary Policy Committee (MPC) meeting today.
The last OPR cut was made in July, where the central bank revised the rate downward by 0.25 per cent, to provide additional policy stimulus to accelerate the pace of economic recovery after Covid-19 related Movement Control Order (MCO).
In a statement today, Bank Negara said the global economy continued to improve, with the easing of containment measures across more economies and strong policy support.
It said the re-opening of production facilities had led to a resumption of manufacturing and trade
activity.
However, it said the recovery in the services sector hadw been slower.
It said financial conditions have improved, although risk aversion remains elevated.
"The outlook is still subject to downside risks and uncertainty, primarily due to the risk of a resurgence of the pandemic and weaker labour market conditions," it said.
Bank Negara said for economic activity in Malaysia continued to recover from the trough in April this year.
"Latest high frequency indicators show that labour market conditions, household spending and trade activity have continued to improve.
"Also supporting the economic recovery are the fiscal stimulus packages, alongside monetary and financial measures," it said.
Bank Negara said the improvement was expected to continue into 2021, supported by the recovery in external demand and expansion in private sector expenditure.
However, it said the pace of recovery would be uneven across sectors, with economic activity in some industries remaining below pre-pandemic levels, and a slower improvement in the labour
market.
"This outlook is still subject to downside risks, particularly from ongoing uncertainties surrounding the course of the pandemic domestically and globally," it said.
In January, March and July, Bank Negara cut OPR by 0.25 per cent respectively, while it cut 0.5 per cent OPR in May.
Bank Negara said the cumulative 125 basis points reduction in the OPR this year would continue to provide stimulus to the economy.
It said inflationary pressures are expected to remain muted in 2020 and headline inflation is likely to average negative in 2020 given the substantially lower global oil prices, and average higher in 2021, within the earlier projected ranges.
The outlook, however, will continue to be significantly affected by global oil and commodity prices.
It said underlying inflation was expected to be subdued amid spare capacity in the economy.
"Given the outlook for growth and inflation, the MPC considers the stance of monetary policy to be appropriate and accommodative.
"The bank remains committed to utilise its policy levers as appropriate to create enabling conditions for a sustainable economic recovery," it said.