Monetary Policy Committee Maintains Overnight Policy Rate at 3.0%
The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has decided to maintain the Overnight Policy Rate (OPR) at 3.0% during its meeting today.
Global Growth Outlook
BNM highlighted that global growth for 2024 turned out higher than expected, reflecting better outturns in the major economies and stronger global trade. For 2025, the global economy is anticipated to be sustained by positive labour market conditions, moderating inflation, and less restrictive monetary policy. Global trade is expected to remain broadly sustained, supported by the continued tech upcycle.
Malaysian Economy Outlook
For the Malaysian economy, the central bank highlighted that the overall growth for 2024 was within expectations. Moving forward, the strength in economic activity is expected to be sustained in 2025, driven by resilient domestic expenditure. Employment and wage growth, as well as policy measures, including the upward revision of the minimum wage and civil servant salaries, will support household spending.
Investment Activity and Exports
The robust expansion in investment activity is expected to be sustained by the progress of multi-year projects in both the private and public sectors, the continued high realisation of approved investments, as well as the ongoing implementation of catalytic initiatives under the national master plans. These investments, supported by higher capital imports, would raise exports and expand the productive capacity of the economy. Exports are expected to be supported by the global tech upcycle, continued growth in non-electrical and electronics goods, and higher tourist spending.
Inflation Outlook
Headline and core inflation averaged 1.8% in 2024. Going into 2025, it is expected to remain manageable, amid the easing global cost conditions and the absence of excessive domestic demand pressures. Global commodity prices are expected to continue to trend lower, contributing to moderate cost conditions in the near term.
Ringgit Performance
The ringgit’s performance continues to be primarily driven by external factors. The narrowing interest rate differentials between Malaysia and the advanced economies is positive for the ringgit. While financial markets could experience bouts of volatility due to global policy uncertainties, BNM said Malaysia’s favourable economic prospects and domestic structural reforms, complemented by ongoing initiatives to encourage flows, would continue to provide enduring support to the ringgit.
Monetary Policy Stance
At the current OPR level, the monetary policy stance remains supportive of the economy and is consistent with the current assessment of inflation and growth prospects. The MPC remains vigilant to ongoing developments to inform the assessment on the domestic inflation and growth outlook. The MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability.
Conclusion
In conclusion, the MPC’s decision to maintain the OPR at 3.0% is expected to support the Malaysian economy’s growth prospects while keeping inflation under control. The central bank’s assessment of the global and domestic economies remains positive, with growth expected to be sustained by resilient domestic expenditure and robust investment activity.
Frequently Asked Questions
Q: What is the current OPR level maintained by the MPC?
A: The current OPR level is 3.0%.
Q: What is the outlook for the global economy in 2025?
A: The global economy is expected to be sustained by positive labour market conditions, moderating inflation, and less restrictive monetary policy.
Q: What is the outlook for the Malaysian economy in 2025?
A: The Malaysian economy is expected to be sustained by resilient domestic expenditure, robust investment activity, and higher exports.
Q: What is the expected inflation rate in 2025?
A: Headline and core inflation is expected to remain manageable, averaging around 1.8% in 2025.