Bank Negara Malaysia recently announced its decision to keep the Overnight Policy Rate (OPR) steady at 3.00 percent.
Let’s take a closer look at the global and Malaysian economic landscapes that influenced this decision.
The global economy is growing, thanks to strong domestic demand and positive labor market conditions.
However, challenges persist, including sluggish global trade, a slow recovery in China, and modest global inflation. The growth outlook faces risks from geopolitical tensions, inflation spikes, and financial market volatility.
Confirmation of 2023 GDP growth
Malaysia’s GDP for 2023 met expectations, with projections for improved growth in 2024. Factors contributing to this include a rebound in exports, resilient domestic spending, and ongoing investments in various sectors.
Despite positive indicators, risks linger, especially from external demand uncertainties and potential declines in commodity production.
Inflation Trends: Insights and expectations
Inflation in Malaysia moderated in the fourth quarter of 2023, influenced by stable demand conditions.
Overall, 2023 saw headline and core inflation rates at 2.5% and 3.0%, respectively.
The outlook for 2024 suggests modest inflation, with potential risks tied to domestic policy changes, global commodity prices, and financial market shifts.
Ringgit movements: External influences
Recent fluctuations in the Malaysian ringgit are attributed to external factors, not reflecting the domestic economic situation accurately.
Bank Negara Malaysia remains committed to ensuring ample liquidity in the foreign exchange market, while local financial institutions maintain strong buffers for sustained credit growth.
Monetary policy stance: OPR at 3.00%
With the OPR maintained at 3.00 percent, the monetary policy supports Malaysia’s economic stability.
This aligns with the current assessment of inflation and growth. Bank Negara Malaysia remains watchful of ongoing developments, aiming to sustain a policy that encourages economic growth while ensuring price stability.
Read the full statement here.
Our previous coverage on OPR:
