OPR held at 3.00% as expected, stability expected through 2025
The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) kept the Overnight Policy Rate (OPR) at 3.00% in its sixth and final meeting of the year, aligning with our forecast and the unanimous consensus of all 18 Bloomberg survey respondents. This marks the ninth consecutive meeting with no OPR change following a surprise hike in May 2023.
Policy statement: No change to its stance. The MPC reinstated that its monetary policy "remains supportive of the economy and is consistent with the current assessment of inflation and growth prospects."
- Growth: The MPC stated that "the latest indicators point towards sustained strength in economic activity driven by resilient domestic expenditure and higher export activity." Growth is expected to remain steady, mainly backed by exports, household spending, investment activity, and Budget 2025 measures. Overall, the outlook remains neutral, with risks seen as fairly balanced, aligning closely with the previous statement.
- Inflation: Year-to-date, headline and core inflation currently average at 1.8% YoY. This is lower than the BNM initial forecast of 2.0% - 3.5%. The MPC has not yet specified its 2025 inflation target, but the MoF recently projected a range of 2.0% - 3.5%. The MPC noted that the upside risk to inflation would depend on the implementation of announced domestic policy measures and its spillover effects.
- Ringgit: The MPC remarked, "the outcome of the US elections could heighten volatility in the near term", reflecting the impact of the US presidential election on global and domestic markets. However, the MPC expects the ringgit to gain support from narrowing interest rate differentials, favourable domestic economic prospects, and structural reforms alongside initiatives to encourage capital flow.
Download Full Content:
