KUALA LUMPUR: Bank Negara Malaysia's Monetary Policy Committee (MPC) has decided to keep the overnight policy rate (OPR) unchanged at 3.00 per cent as it expects growth to expand, driven by domestic demand amid strong labour market conditions.
The MPC had only one rate hike of 25 basis points this year in May.
At the current OPR level, the central bank said the monetary policy stance remains supportive of the economy and is consistent with the current assessment of the inflation and growth prospects.
"The monetary policy committee (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.
The central bank said global growth remains weighed down by persistently elevated inflation and higher interest rates, with several major economies experiencing slowing growth momentum.
There are early signs of improvement in China's growth, though its property market remained weak.
"For the Malaysian economy, the advance gross domestic product (GDP) estimate points to an improvement in economic activity in the third quarter.
"Growth in 2024 will be driven mainly by resilient domestic expenditure, with some support emanating from the expected recovery in electrical and electronic (E&E) exports," it said.
According to the Bank Negara, continued employment and wage growth remain supportive of household spending.
Meanwhile, it said tourist arrivals and spending are expected to improve further.
"Investment activity would be supported by continued progress of multi-year infrastructure projects, and implementation of catalytic initiatives under the national master plans.
"Measures under Budget 2024 will also provide additional impetus to economic activity," it said.
As expected, both headline and core inflation have moderated, mainly due to easing cost pressures. In the third quarter (Q3) , headline and core inflation averaged at 2.0 per cent and 2.5 per cent, respectively.
Going into 2024, the central bank said inflation is expected to remain modest. Of note, the government's intention to review price controls and subsidies in 2024 will affect the outlook for inflation and demand conditions.
On the expectations of a higher-for-longer interest rate environment in the US, and increased concerns over the escalation of geopolitical tensions have contributed to a persistently strong US dollar.
"This has affected other major and emerging market currencies, including the ringgit.
"Nevertheless, these developments are not expected to derail Malaysia's growth prospects.
"Bank Negara Malaysia will continue to manage risks of heightened volatility, including to provide liquidity, to ensure the orderly functioning of the domestic foreign exchange market," it added.