BNM: OPR remains at 1.75pc, headline inflation to average 2.5-4.0pc in 2021

A general view of the Bank Negara Malaysia headquarters in Kuala Lumpur June 30, 2017. — Picture by Yusof Mat Isa
A general view of the Bank Negara Malaysia headquarters in Kuala Lumpur June 30, 2017. — Picture by Yusof Mat Isa

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KUALA LUMPUR, May 6 — Bank Negara Malaysia (BNM) has maintained the overnight policy rate (OPR) at 1.75 per cent at its third Monetary Policy Committee (MPC) meeting today.

In a statement, BNM said the MPC considered the stance of monetary policy to be appropriate and accommodative.

“Given the uncertainties surrounding the pandemic, the stance of monetary policy going forward will continue to be determined by new data and information and their implications on the overall outlook for inflation and domestic growth,” it said.

The central bank said it also remained committed to utilise its policy levers as appropriate to foster enabling conditions for a sustainable economic recovery.

For Malaysia, BNM said the growth outlook remained subjected to downside risks, stemming mainly from ongoing uncertainties in developments related to the Covid-19 pandemic and potential challenges that might affect the rollout of vaccines both globally and domestically.

It said the latest indicators pointed to continued improvements in economic activity in the first quarter and into April.

“While the recent re-imposition of containment measures in select locations will affect economic activity in the short term, the impact will be less severe as almost all economic sectors are allowed to operate,” it said.

It said the growth trajectory is projected to improve, driven by the stronger recovery in global demand and increased public and private sector expenditure amid continued support from policy measures.

“Growth will also be supported by higher production from existing and new manufacturing facilities, particularly in the electrical and electronics and primary-related sub-sectors, as well as oil and gas facilities,” it said.

It said the progress of the domestic Covid-19 vaccine programme would also lift sentiments and contribute towards recovery in economic activity.

BNM said the global economic recovery continued to strengthen, particularly in the major economies supported by improvements in manufacturing and trade activity although the pace might vary across countries.

It said the ongoing rollout of vaccination programmes and sizeable fiscal stimulus measures in the United States, as well as policy support in other major economies would further facilitate an improvement in domestic demand.

However, it said the recovery trajectory in some economies could be disrupted by a re-tightening of containment measures to curb Covid-19 resurgences.

Nevertheless, it said the recent financial market volatility has somewhat receded and financial conditions remained supportive of growth.

“The balance of risks to the growth outlook remains tilted to the downside due mainly to uncertainty over the path of the pandemic, as well as potential risks of heightened financial market volatility,” it said.

It said Malaysia’s headline inflation in 2021 is projected to average higher between 2.5 per cent and 4.0 per cent primarily due to the cost-push factor of higher global oil prices.

“In terms of trajectory, headline inflation is anticipated to temporarily spike in the second quarter of 2021 due particularly to the lower base from the low domestic retail fuel prices in the corresponding quarter of 2020.

“However, this will be transitory as headline inflation is projected to moderate thereafter as this base effect dissipates,” it said.

It said the underlying inflation, as measured by core inflation, is expected to remain subdued, averaging between 0.5 per cent and 1.5 per cent for 2021 amid continued spare capacity in the economy.

“The outlook, however, is subject to global oil and commodity price developments,” it added. — Bernama

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