KUALA LUMPUR: Bank Negara kept the overnight policy rate (OPR) unchanged at 3%, as widely expected, noting that this level supports Malaysia's economy and aligns with its assessment of inflation and growth prospects.
“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 Monetary Policy Committee (MPC) remains vigilant to ongoing developments to inform the assessment on the domestic inflation and growth trajectories going into 2025,” Bank Negara said in a statement.
It added that the MPC will ensure that the monetary policy stance remains conducive to sustainable economic growth amid price stability.
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The central bank said the global economy continues to expand, supported by resilient labour markets and an ongoing recovery in global trade.
Looking forward, global growth is expected to be sustained by strong labour market conditions, moderating inflation, and less restrictive monetary policies.
It noted that the growth outlook remains subject to downside risks, mainly from further escalation of geopolitical tensions, heightened volatility in global financial markets, and slower growth momentum in major economies.
"For the Malaysian economy, the latest indicators suggest sustained strength in economic activity, driven by resilient domestic expenditure and increased export activity," it said, adding that, going forward, exports are expected to benefit from the global tech upcycle, continued strength in non-E&E goods, and higher tourist spending.
Meanwhile, Bank Negara said employment and wage growth, as well as policy measures, remain supportive of household spending.
It said the robust expansion in investment activity would be sustained by the progress of multi-year projects in both the private and public sectors, the higher realisation of approved investments, as well as the implementation of catalytic initiatives under the national master plans.
These investments, supported by higher capital imports, will raise exports and expand the productive capacity of the economy.
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“Budget 2025 measures will provide additional support to growth. The growth outlook is subject to downside risks from lower-than-expected external demand and commodity production,” it said.
Meanwhile, upside risks to growth mainly emanate from greater spillover from the tech upcycle, more robust tourism activity, and faster implementation of investment projects.
“Headline and core inflation remain modest, averaging 1.8% year-to-date. Going into 2025, inflation is expected to remain manageable, amid the easing global cost conditions and the absence of excessive domestic demand pressures.
“Nevertheless, the inflation outlook remains subject to the details of the implementation of announced domestic policy measures. Upside risk to inflation would be dependent on the extent of spillover effects of domestic policy measures, as well as global commodity prices and financial market developments,” Bank Negara said.
Additionally, it said the ringgit's performance remains largely influenced by external factors, with the outcome of the U.S. elections potentially increasing volatility in the near term.
“Looking ahead, the narrowing interest rate differentials between Malaysia and the advanced economies is positive for the ringgit. Malaysia’s favourable economic prospects and domestic structural reforms, complemented by ongoing initiatives to encourage flows, will continue to provide enduring support to the ringgit,” the central bank said.
