OPR maintained at 3%

Following Bank Negara

KUALA LUMPUR: Bank Negara has maintained the overnight policy rate (OPR) at 3% at its Monetary Policy Committee (MPC) meeting held today after an unexpected 25-basis point cut in July.

This was in line with market consensus for the benchmark key interest rate to stay at the current level.  

The central bank in a statement said at the current level of the OPR, the degree of monetary accommodativeness is consistent with the policy stance to ensure that the domestic economy continues on a steady growth path amid stable inflation, supported by continued healthy financial intermediation in the economy. 

“Malaysia’s growth moderated slightly in the second quarter of the year, following weaker net exports and a drawdown in stocks. Domestic demand, however, remained the key driver of growth, with private consumption and private investment growing at a faster pace. 

“Going forward, private consumption will remain supported by wage and employment growth, with additional impetus coming from announced Government measures to increase disposable income. Investment activity will continue to be anchored by the on-going implementation of infrastructure projects and capital spending in the manufacturing and services sectors, “ the bank noted.

On the external front, it said export growth is expected to remain weak following subdued demand from Malaysia’s key trading partners, adding that, overall, the economy is projected to expand within expectations in 2016, and to remain on a steady growth path in 2017.

Headline inflation moderated to 1.1% in July. Inflation is expected to be at the lower end of the 2 to 3% range for 2016 and to remain relatively stable in 2017 given the environment of low global energy and commodity prices, and generally subdued global inflation.

Domestic financial conditions have remained stable since the previous MPC meeting with financial markets continuing to function in an orderly manner. Financial institutions continue to operate with strong capital and liquidity buffers and the growth of financing to the private sector is consistent with the pace of economic activity, the bank said. 

Banking system liquidity remains ample. It added that the MPC would continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation. 

On the global front, the bank said the world economy continued to expand at a moderate pace, noting that growth across the advanced economies has been modest. In Asia, economic activity has been supported by domestic demand amid weaker export growth. 

While volatility in the international financial markets has subsided, markets remain vulnerable to setbacks and changes in sentiments. Going forward, the central bank said downside risks to global growth remain high following uncertainty over the growth momentum and policy shifts in major economies, and unresolved issues post the EU referendum in the UK.