22 January, KUALA LUMPUR – Bank Negara Malaysia’s (BNM) Monetary Policy Committee (MPC) has decided to reduce the Overnight Policy Rate (OPR) to 2.75 per cent from 3.0 per cent as a pre-emptive measure to secure improving growth trajectory amid price stability. The last time the OPR was set at 2.75% was in early 2011.
“Downside risks remain due to geopolitical tensions and policy uncertainties in a number of countries, although monetary easing across major economies in the second half of 2019 has helped ease financial conditions and is expected to continue to support economic activity. This could cause a resurgence of financial market volatility and weigh on the global growth outlook,” BNM said in its first Monetary Policy Statement for the year here, today.
Following the reduction in the OPR, the ceiling and floor rates of the corridor of it were correspondingly reduced to 3.00 per cent and 2.50 per cent, respectively.
For Malaysia’s economy, the central bank said the latest indicators and supply disruptions in commodity-related sectors point to the moderate expansion of economic activities in the fourth quarter.
“For 2019, growth will be within the projected range, while for 2020, growth is expected to gradually improve, with continued support from household spending and better export performance.
“Overall investment activity is expected to record a modest recovery, underpinned by ongoing and new projects, both in the public and private sectors,” it added.
However, downside risks to growth remained and these include uncertainty from various trade negotiations, geopolitical risks, weaker-than-expected growth of major trade partners, heightened volatility in financial markets, and domestic factors that include weakness in commodity-related sectors and delays in the implementation of projects.
Headline inflation is expected to average higher this year from 0.7 per cent in 2019 but remains modest.
“The trajectory of headline inflation will be dependent on global oil and commodity price developments and the timing of the lifting of the domestic retail fuel price ceilings.
“Underlying inflation is expected to remain broadly stable, reflecting the continued expansion in economic activity and the absence of strong demand pressures,” it said.