Malaysia's OPR unchanged at 3.0pct

KUALA LUMPUR: Bank Negara Malaysia, as expected, has decided to keep its overnight policy rate (OPR) unchanged at 3.00 per cent.

The central bank had only one rate hike of 25 basis points last year in May.

In a statement after its Monetary Policy Committee (MPC) meeting today, Bank Negara said growth for Malaysia is expected to improve in 2024, driven by the recovery in exports and resilient domestic expenditure.

"Export growth is turning positive after contracting since March 2023 and will continue to be supported by stronger global trade.

"Tourist arrivals and spending are poised to rise further. Continued employment and wage growth remain supportive of household spending," said the central bank in a statement today. 

It said the ongoing progress of multi-year projects in both the private and public sectors are poised to spur investment activities. Other factors to support investments are the implementation of catalytic initiatives under the national master plans, as well as the higher realisation of investments.

The growth outlook is however subject to downside risks stemming from weaker-than-expected external demand and larger declines in commodity production. 

Meanwhile, upside risks to growth mainly emanate from greater spillover from the tech upcycle, more robust tourism activity and faster implementation of existing and new projects.

Meanwhile, Bank Negara stated headline and core inflation stood at 1.5 per cent and 1.8 per cent respectively in January 2024, trending in line with expectations. 

Inflation in 2024 is expected to remain moderate, broadly reflecting stable demand conditions and contained cost pressures. 

"However, this outlook continues to be highly dependent on the implementation of domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments.

On the ringgit, Bank Negara said the local currency is currently undervalued, given Malaysia's economic fundamentals and growth prospects. 

"The Government and Bank Negara Malaysia are taking coordinated actions to encourage repatriation and conversion of foreign investment income by government-linked companies (GLCs) and government-linked investment companies (GLICs). 

"These actions are contributing to greater inflows, lending support to a firmer ringgit. Over the

medium term, ongoing structural reforms will provide more enduring support to the ringgit," it added. 

It also noted the global economy expanded albeit moderately, supported by domestic demand amid improvement in trade activity.

Favourable labour market conditions in some countries continue to support consumption activity.

Looking ahead, Bank Negara said growth in regional economies is expected to improve, while

China's growth would likely remain modest given continued weakness in the property market. 

Global trade is expected to strengthen as the global tech upcycle gains momentum. 

Nonetheless, the global monetary policy stance is likely to remain tight in the near term, as inflation remains above average. 

"At the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects.

"The MPC remains vigilant to ongoing developments to inform the assessment on the outlook of domestic inflation and growth. The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability," it said in a statement. 

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