10:00- 18:00

Monday to Friday

Freemind Works,

Bayan Lepas

10:00- 18:00

Monday to Friday

Freemind Works,

Bayan Lepas

BNM Increases OPR By 25 Basis Points To 2.25 Percent

Kevin Hans Jun Wei Samuel No Comments

The unprecedented Covid-19-driven conditions that required a historically low OPR continued to dissipate, according to Bank Negara Malaysia (BNM), which announced on Wednesday (July 6) that its Monetary Policy Committee (MPC) had decided to raise the overnight policy rate (OPR) by 25 basis points (bps) to 2.25 percent.

According to the central bank, the OPR’s corridor’s ceiling and floor rates have correspondingly increased to 2.5 percent and 2.0 percent, respectively.

The global economy’s reopening and the improving state of the labor market, according to the central bank, have continued to support the expansion of economic activity.

However, the effects of rising cost pressures, the military conflict between Russia and Ukraine, and strict containment measures in China brought on by COVID-19 have partially offset these.

Global supply chain conditions, the conflict in Ukraine, high cost pressures, and financial market volatility will all continue to have an impact on how quickly the world economy grows in the future, according to BNM.

In regards to the Malaysian economy, the central bank stated that recent months have seen a continued strengthening of the nation’s economic activity.

According to BNM, exports and retail spending indicators have confirmed the country’s economic growth momentum, which has been bolstered by the country’s change from pandemic to endemic status for the Covid-19 virus.

With increased labor force participation and better income prospects, the unemployment rate in the labor market decreased even more. Looking ahead, Malaysia’s economic growth will be aided by strong domestic demand even though external demand is anticipated to moderate due to global growth headwinds.

Additionally, the recovery of the tourism-related sectors would be aided by the reopening of international borders as of April 1, 2022. The completion of multi-year projects continues to support investment activity and prospects.

However, BNM noted that there are still downside risks to growth due to slower-than-expected global growth, escalating geopolitical conflicts, and worsening supply chain disruptions.

According to the central bank, Malaysia’s headline inflation for the first year of 2022, as determined by the Consumer Price Index, averaged 2.4 percent.

The nation’s headline inflation may be higher in some months due primarily to the base effect of electricity prices, according to BNM, even though the country’s inflation is expected to stay within the 2.2 percent to 3.2 percent forecast for the year.

According to BNM, “the [Malaysian] inflation outlook continues to be subject to global commodity price developments, which are primarily caused by the ongoing military conflict in Ukraine and protracted supply-related disruptions, as well as domestic policy measures.”

Following a sustained reopening of the global economy and improvement in labor markets that continued to support the recovery of economic activity from the impact of Covid-19-driven movement restrictions, the MPC increased the OPR by 25 bps to 2 percent on May 11, 2022, from a record low of 1.75 percent.

 

To read more, please scroll further:

KUALA LUMPUR (July 6): Bank Negara Malaysia (BNM) said on Wednesday (July 6) its Monetary Policy Committee (MPC) decided to increase the overnight policy rate (OPR) by 25 basis points (bps) to 2.25% as the unprecedented Covid-19-driven conditions that necessitated a historically low OPR continued to recede.

The ceiling and floor rates of the OPR’s corridor are correspondingly increased to 2.5% and 2.0% respectively, according to the central bank.

“Amid the positive growth prospects for the Malaysian economy, the MPC decided to further adjust the degree of monetary accommodation. This is consistent with the MPC’s view that the unprecedented conditions that necessitated a historically low OPR have continued to recede,” BNM said.

“At the current OPR level, the stance of monetary policy remains accommodative and supportive of economic growth. The MPC will continue to assess evolving conditions and their implications for the overall outlook to domestic inflation and growth.

“Any adjustments to the monetary policy settings going forward would be done in a measured and gradual manner, ensuring that monetary policy remains accommodative to support a sustainable economic growth in an environment of price stability,” BNM said.

The central bank said the reopening of the global economy and improvement in labour market conditions continued to support the recovery of economic activity.

However, these have been partly offset by the impact of rising cost pressures, the military conflict between Russia and Ukraine, and strict Covid-19-driven containment measures in China.

“Inflationary pressures have continued to increase mainly due to elevated commodity prices and strong demand conditions despite some easing in global supply chain conditions.

“Consequently, central banks are expected to continue adjusting their monetary policy settings, some at a faster pace, to reduce inflationary pressures.

“Going forward, the pace of global growth is expected to moderate, and will continue to be affected by elevated cost pressures, the conflict in Ukraine, global supply chain conditions and financial market volatility,” BNM said.

On the Malaysian economy, the central bank said the country’s economic activity continued to strengthen in recent months.

Exports and retail spending indicators have affirmed the nation’s economic growth momentum, supported by the country’s transition to Covid-19 endemic status from pandemic previously, according to BNM.

“In the labour market, the unemployment rate declined further, with higher labour participation and improving income prospects. Looking ahead, while external demand is expected to moderate, weighed by headwinds to global growth, [Malaysia’s] economic growth will be supported by firm domestic demand.

“Additionally, the reopening of international borders since April 1, 2022 would facilitate the recovery of tourism-related sectors. Investment activity and prospects continue to be supported by the realisation of multi-year projects.

“However, downside risks to growth continue to stem from a weaker-than-expected global growth, further escalation of geopolitical conflicts, and worsening supply chain disruptions,” BNM said.

On inflation, the central bank said that year-to-date in 2022, Malaysia’s headline inflation, as measured by the Consumer Price Index, averaged 2.4%.

While the country’s inflation is projected to remain within the 2.2% to 3.2% forecast for the year, the nation’s headline inflation may be higher in some months due mainly to the base effect of electricity prices, according to BNM.

“Underlying inflation, as measured by core inflation, is expected to average between 2% and 3% in 2022 as demand continues to improve amid the high-cost environment. Nevertheless, the extent of upward pressures on inflation will remain partly contained by existing price controls, fuel subsidies and continued spare capacity of the economy.

“The [Malaysian] inflation outlook continues to be subject to global commodity price developments, arising mainly from the ongoing military conflict in Ukraine and prolonged supply-related disruptions, as well as domestic policy measures,” BNM added.

On May 11, 2022, the MPC increased the OPR by 25 bps to 2% from a record low of 1.75% as global inflationary pressures increased sharply and after taking into account that sustained reopening of the global economy and improvement in labour markets continued to support the recovery of economic activity from the impact of Covid-19-driven movement restrictions.

The OPR at 1.75% was the lowest on record, according to data dating back to 2004 on the central bank’s website.

The OPR had been maintained at 1.75% since July 7, 2020, when BNM cut the rate from 2% following the Covid-19 outbreak that began in early 2020.

 

Source: Edge Prop

Leave a Reply

Your email address will not be published.

Top